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

In: Contemporary Trends and Challenges in Finance

Author

Listed:
  • Radosław Pietrzyk

    (Wrocław University of Economics)

  • Paweł Rokita

    (Wrocław University of Economics)

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.

Suggested Citation

  • Radosław Pietrzyk & Paweł Rokita, 2018. "Determination of the Own Funds Requirements for the Risk of Binary Options," Springer Proceedings in Business and Economics, in: Krzysztof Jajuga & Hermann Locarek-Junge & Lucjan T. Orlowski (ed.), Contemporary Trends and Challenges in Finance, pages 23-32, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-76228-9_3
    DOI: 10.1007/978-3-319-76228-9_3
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    Cited by:

    1. Gurdal Ertek & Aysha Al-Kaabi & Aktham Issa Maghyereh, 2022. "Analytical Modeling and Empirical Analysis of Binary Options Strategies," Future Internet, MDPI, vol. 14(7), pages 1-23, July.

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