what-if – (binary) option valuations – develop intuition

as T -> inf

C_0 -> S_0

P_0 -> 0.0

binary Call price ->

binary Put price ->

as t -> T

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as S -> K

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as S -> 0

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as S -> inf

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as R_disc -> inf

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as R_ disc -> 0

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as R_grow -> inf

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as R_grow -> 0

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as K -> inf

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as K -> 0

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as sigma -> inf

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

as sigma -> 0

C_0 ->

P_0 ->

binary Call price ->

binary Put price ->

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