Derivative Engines - Options Handbook






European Digital:

European Digital option is formed by a European barrier. Barrier level can also be considered as the strike level. The path of the underlying asset’s price through the life of the option is not important for the payout of the option.

At the expiry date of the option a spot rate is fixed to check if the payout condition is met or not. The ECB fixing which is announced by the European Central Bank is generaly used for this fixing.

Option can pay payout if the fixing at maturity is higher than the barrier level like a Call option or can pay payout if the fixing at maturity is lower than the barrier level like a Put option. These options are also called Digital Call or Digital Put.


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