References

Digital options are not a novel concept. They have been thoroughly explored in decades of studies on financial derivatives. Here are a few insightful ones:

Unscrambling the binary code

Mark Rubinstein, Eric Reiner, 1991, Risk Magazine

The pay-offs of binary options tend to be switched completely one way or the other depending on whether the underlying asset price satisfies some condition. This article considers a wide variety of binaries, first those with path-independent pay-off s and then the more complex barrier binaries with path-dependent pay-offs.

An introduction to quantitative finance

Stephen Blyth, 2013, Oxford University Press

Dynamic Hedging: Managing Vanilla and Exotic Options

Nassim Nicholas Taleb, 1997, John Wiley & Sons

Binary options are perhaps the best training ground for a trader as they can teach more about advanced book management. At the heart of most exotic structure and every bet resides a binary.

Other relevant books for reference:

Options, Futures, and Other Derivatives by John Hull

The textbook.

Option Volatility & Pricing: Advanced Trading Strategies and Techniques by Sheldon Natenberg

Written by a trader for traders. A clear and easy-to-understand overview of key concepts without excessive focus on moon math.

Volatility Trading by Euan Sinclair

A fine book that delves into the various nuances of options trading, with extensive discussions on quantitative models for measuring volatility.

The Complete Guide to Option Pricing Formulas by Espen Gaarder Haug

A great reference for options pricing formulas that comes along with ready-to-use spreadsheets.

Divergence is not affiliated with any of these authors, and does not bear responsibility for any error, omission, or defect that may be included in such content. Not financial advice.