DBOE Options Basics
DBOE Options Basics
DBOE Novel and Simple Option Design
DBOE Call option is defined as a Bull Call Spread.
ยท DBOE Call(K,Kc) = Call(K) โ Call(Kc) with Kc > K
At expiry
ยท DBOE Call(K,Kc) = Max(0,Min(Kc โ K, Spot โ K))
DBOE Put option is defined as Bear Put Spread.
ยท DBOE Put(K,Kc) = Put(K) โ Put(Kc) with Kc < K
At expiry
ยท DBOE Call(K,Kc) = Max(0,Min(K - Kc, Spot โ K))
Key benefits of DBOE Options
Users have the flexibility to choose protection range
Collateral requires is capped by the distance of the two strikes i.e. K and Kc
Regular options can be easily constructed
No clearing risk
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