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Derivatives




One-Touch Digital Option


A one-touch option that has additionally the features of a digital option. It pays the fixed amount either once the barrier is reached or traded through or only on expiration date. In essence, it is a digital option (binary option) that pays out out if the market value of the underlying reaches or exceeds the “barrier” once (i.e., for the first time) during a specified period of time.

The version in which payment of the fixed amount is made on expiration date is known as a lock-in option. If the market value of the underlying does not reach or hit the barrier during the specified period, another version of the option- a no-touch digital option (known as a lock-out option)- will pay the fixed amount on expiration date



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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