Binary Options

Mark Rubinstein and Eric Reiner

July 31, 1991

(published under the title: "Unscrambling the Binary Code," in RISK 4 (October 1991), pp. 75-83)

I. contrast to the smooth payoff patterns 8f st andard options, binary options tend to have
uÀ&ð à aEÐ3àÀ A@
à ’Ð• ° À a%PÀ
Àò à à Ð ` is
on function, and the

2
3
where v (u – μt)/σ√t, μ log(r/d) – ½σ2