Filter by Categories
Accounting
Banking

Derivatives




No-Touch Digital


A digital option that pays out if the underlying doesn’t touch (breach) a specified barrier. Therefore, the option includes a built-in digital knock-out mechanism. The call would be an up and out digital, and the put a down-and-out digital. The option’s payoff is a fixed amount provided the underlying price remains below (for a call) and above (for a put) the strike price during the option’s time to maturity (the observation period).

For example, a no-touch digital could be one that pays a 7% coupon if the underlying never drops below 85% of its initial level.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*