j***g
发帖数: 158 | | d*j
发帖数: 13780 | 2 how to price it ? use a call spread
then short that to hedge
【在 j***g 的大作中提到】
: 那位帮着讲解讲解
| j***g
发帖数: 158 | 3 but spreads can not exactly offset binary options since there is always a
buffer in a spread. so in practice people just narrow the buffer and ignore
it, or there are other approaches to handle this?
thx
【在 d*j 的大作中提到】
: how to price it ? use a call spread
: then short that to hedge
| V****u
发帖数: 73 | 4 For long dated, the "buffer" you mentioned is neglectable. In vol space it
is equivallent to a risk reversal and that is exactly what people do in
practice. The actual spread of the strikes for the R/R is in fact often very
wide.
When expiry is approaching the spread of this R/R has to be narrowed but the
P&L comes from the "buffer" is usually very little compared to the whole
PNL of the book. What really sucks is when the barrier is very close to the
spot on expiry. It is the digital risk that
【在 j***g 的大作中提到】
: but spreads can not exactly offset binary options since there is always a
: buffer in a spread. so in practice people just narrow the buffer and ignore
: it, or there are other approaches to handle this?
: thx
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