Digital Contracts: Simple Tools for Pricing Complex Derivatives

摘要: This article presents a simple, unified approach for valuing variety of financial assets using digital contracts. Three types digitals are used: option paying either one dollar or nothing, share nothing converting into the underlying asset; and first-touch first time that price stock moves some specified region. It is shown how values these three can be determined wide payoff events they combined to complex Copyright 2000 by University Chicago Press.