two-currency binary paradox

mensatrader

Active member
183 0
Dear all

For a two-currency paradox, the delta for one party is the binary price of the other and vice versa. For example, for USD-EUR, a bet in dollar based person on USD-EUR is different in price from the translation into Euros of a bet in Euros on USD-EUR of the same strike and expiry. Define N(d2) as the price of the binary for a dollar based person, then N(d1) will be the price of the bet for the person based in Euro.

I really don't understand the logics here. Many thanks
 

mensatrader

Active member
183 0
Dear all

For a two-currency paradox, the delta for one party is the binary price of the other and vice versa. For example, for USD-EUR, a bet in dollar based person on USD-EUR is different in price from the translation into Euros of a bet in Euros on USD-EUR of the same strike and expiry. Define N(d2) as the price of the binary for a dollar based person, then N(d1) will be the price of the bet for the person based in Euro.

I really don't understand the logics here. Many thanks

any advices? thanks!! I know the following relationships hold true: d2 = d1 - vol*square root of time to maturity; N(d1) is the delta of the vanilla call, N(d1) - 1 is the delta of the vanilla put; N(d2) is the probability of the underlying asset price being above the strike price at expiry for the binary call; N(-d2) = 1-N(d2) is the probability of the underlying asset price being below the strike price at expiry for the binary put.
 
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mensatrader

Active member
183 0
and also why two positions on two different continents cannot be marked at the same price. Furthermore, two traders performing a trade on opposite sides of the fence would thus both show a profit or a loss on the same leg????
 

gerryg

Established member
900 6
I suppose simultaneous lost or profit may occur while trading on binary options, because there is not one deal, but a lot of them, executing on the market. The second cause of numerour traders' fail is broker cheating. Spend more time while choosing your broker, because your success significiantly depends on it.
 

mensatrader

Active member
183 0
I suppose simultaneous lost or profit may occur while trading on binary options, because there is not one deal, but a lot of them, executing on the market. The second cause of numerour traders' fail is broker cheating. Spend more time while choosing your broker, because your success significiantly depends on it.

thanks man! Mathematically, why it has such relationship between binary call and put that the delta of the put is the price of the binary call????
 
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mensatrader

Active member
183 0
hi, can some1 please help with this? Is this not really important when trade binary FX options?

thanks a lot
 
 
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