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Information Asymmetry, Liquidity and the Dynamic Volume-Return Relation in Panel Data Analysis Read chapter Read first chapter

2018 | OriginalPaper | Chapter

Determination of the Own Funds Requirements for the Risk of Binary Options

Authors : Radosław Pietrzyk, Paweł Rokita

Published in: Contemporary Trends and Challenges in Finance

Publisher: Springer International Publishing

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Abstract

Binary options are popular instruments, especially in non-regulated financial markets. Determination of adequate capital, if performed in compliance with binding legal regulations on own funds requirements, may be seriously misleading. This is particularly the case of short-term binary options. The aim of this article is to discuss critically the existing solutions in EU law and to propose some modifications that would be better suited to the nature of this type of financial instrument. The modifications allow to avoid overestimation of adequate capital and better reflect properties of the value of long-term and short-term cash-or-nothing binary options.

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previous chapter Density Forecasts of Emerging Markets’ Exchange Rates Using Monte Carlo Simulation with Regime Switching
next chapter Relationships Between Returns in EU Equity Markets in 2005–2016: Implications for Portfolio Risk Diversification
Appendix
Available only for authorised users
Literature
Black F (1976) The pricing of commodity contracts. J Financ Econ 3:167–179CrossRef
Black F, Scholes M (1973) The pricing of options and corporate liabilities. J Polit Econ 81(3):637–654CrossRef
Garman MB, Kohlhagen SW (1983) Foreign currency option values. J Int Money Financ 2(3):231–237CrossRef
Heston SL, Nandi S (2000) A closed-form GARCH option valuation model. Rev Financ Stud 13(3):585–625CrossRef
Kosowski RL, Neftci SN (2015) Principles of financial engineering. Elsevier, Boston, MA
Merton RC (1973) Theory of rational option pricing. Bell J Econ Manag Sci 4(1):141–183CrossRef
Metadata
Title
Determination of the Own Funds Requirements for the Risk of Binary Options
Authors
Radosław Pietrzyk
Paweł Rokita
Copyright Year
2018
Book
Contemporary Trends and Challenges in Finance

Print ISBN: 978-3-319-76227-2

Electronic ISBN: 978-3-319-76228-9

Copyright Year: 2018

DOI
https://doi.org/10.1007/978-3-319-76228-9_3