Spreading the Financial Binary Code: A Valuation Methodology of Financial Binary Bets

Mistry, Suresh Bhupendra (2006) Spreading the Financial Binary Code: A Valuation Methodology of Financial Binary Bets. [Dissertation (University of Nottingham only)] (Unpublished)

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To many finance enthusiasts, the mention of binary betting bares no relation to the complex derivatives and corporate theories most commonly associated with financial study. However, the evolution of spread and binary betting has demanded respect within the financial industry, and over the past few years the number of account holders for these trading methods has grown exponentially. The unique characteristics of binary betting has enabled many traders and investors to apply their finance skills in order to achieve tax free profits. Such potential to make money has recently been made available to a wider range of investors with the introduction of sports and political binary betting. The scope of such an industry is both daunting and fascinating, and is predicted to grow even further in the foreseeable future.

This dissertation explores and reviews the concept of binary spread betting, with emphasis upon financial binary bets, more precisely those related to the FTSE 100 index. Two different valuation methodologies are derived using a Monte Carlo simulation and a geometric Brownian motion analytical formulation, and then the results are compared to test the validity and accuracy of the procedures. Through the application of Visual Basic programming and stochastic calculus, the valuation procedures created will enable investors to value the binary bets they place. The theory has been tried and tested using real market data, and has proven to be successful in valuing a wide range of binary bets.

One point to remember is that the simplicity of the financial binary bet concept may disguise the level of sophistication involved in the derivation and analysis of a valuation procedure. In conclusion, this dissertation has developed and evaluated a valuation methodology never before seen in past literature.

Item Type: Dissertation (University of Nottingham only)
Keywords: Binary Betting, Spread Betting, Monte Carlo Simulation, Geometric Brownian Motion, Visual Basic, Stock Price Modelling
Depositing User: EP, Services
Date Deposited: 21 Dec 2006
Last Modified: 09 Mar 2018 12:01
URI: https://eprints.nottingham.ac.uk/id/eprint/20249

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