incorporate premium into binary credit option payoff? regular, question, determine, 2011

Zesty

seen a CFAI question where question was determine payoff for a binary credit option, and question told us the premium for these options, and the cost of premium was NOT subtracted from total payoff to determine answer.

anyone know why? being that premiums ARE incorporated into payoffs for regular options?



Edited 1 time(s). Last edit at Thursday, May 26, 2011 at 10:10AM by dpcfa.

mcmc

Key word is payoff not profit.

liangfeng

jmac01 Wrote:
-------------------------------------------------------
> Are you sure you are correctly seeing whether the
> question for each are asking for "payoff" vs
> "profit"? I feel like that is usually the
> distinction.

So quick.