In binary credit options, the payoff is contingent upon both a credit even occuring and option being in the money. The value chaing up or down alone will not trigger the payoff. Is this correct?
Does this apply to credit spread options as well? What about credit forwards and credit swaps? Please clarify.
For binary credit options and CDS, the credit event must be determined in advance. So you’re correct about first statement.
For credit spread options, credit forwards, changing the spread is in itself a credit event and only spread changes determine the payoff.
See the names tells us that. ie - Binary (0 or 1) is where you either have a payoff or not.
But the rest they are dynamic and would have based on the difference between the spread at which you locked (Strike Spread) vs Spread at Expiration. Cheers!
Anything can have a binary option from what i understand.