Determination of the Own Funds Requirements for the Risk of Binary Options

Radosław Pietrzyk () and Paweł Rokita ()
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Radosław Pietrzyk: Wrocław University of Economics
Paweł Rokita: Wrocław University of Economics

A chapter in Contemporary Trends and Challenges in Finance, 2018, pp 23-32 from Springer

Abstract: Abstract Binary options are popular instruments, especially in non-regulated financial markets. Determination of adequate capital, if performed in compliance with binding legal regulations on own funds requirements, may be seriously misleading. This is particularly the case of short-term binary options. The aim of this article is to discuss critically the existing solutions in EU law and to propose some modifications that would be better suited to the nature of this type of financial instrument. The modifications allow to avoid overestimation of adequate capital and better reflect properties of the value of long-term and short-term cash-or-nothing binary options.

Keywords: Binary Options; Funding Requirements; Delegated Regulation; Underlying Instru Ment; Equivalent Delta (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-76228-9_3

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DOI: 10.1007/978-3-319-76228-9_3

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