How are binary prices calculated?
Hi there,
How do the fixedodds companies go about calculating the prices in binary bets?
I assume that they use something like BlackScholes to calculate the fair option value, and then do something with it to munge it into a binary. It's the munging bit that interests me  anyone know how it's done? Can anyone point out any example calculations?
Also, I know that spread betting firms can lay off bets on the futures market if they don't want to take on the risk themselves. Can fixedodds be laid off on the options market in a similar way, or are most binaries too short a timescale for that to be feasible? (Most binaries are less than 24 hours, aren't they?)
Many thanks,
Geoff
