Dynamics of a binary option market with exogenous information and price sensitivity

Hannah Gampe, Christopher Griffin

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


In this paper, we derive and analyze a continuous binary option market with exogenous information. The resulting non-linear system has a discontinuous right hand side, which can be analyzed using zero-dimensional Filippov surfaces. Under general assumptions on purchasing rules, we show that when exogenous information is constant in the binary asset market, the price always converges. We then investigate market prices in the case of changing information, showing empirically that price sensitivity has a strong effect on price lag vs. information. We conclude with open questions on general M-ary option markets.

Original languageEnglish (US)
Article number106994
JournalCommunications in Nonlinear Science and Numerical Simulation
StatePublished - Apr 2023

All Science Journal Classification (ASJC) codes

  • Numerical Analysis
  • Modeling and Simulation
  • Applied Mathematics


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