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  • August 9, 2021
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Digital Option

A type of option whose payoff is determined in a fixed amount of a particular monetary or financial asset or nothing at all. It pays either the fixed amount or zero at the preset maturity date, depending on the level or performance of some underlying rate. The main types of digital options are one-touch digital option, cash-or-nothing option and asset-or-nothing option.

Examples of digital options include digital caps, digital floors, and digital swaptions.

The digital option is also known as a binary option.


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