Payoff profile

Payoff profile
The slope of a line graphed according to the value of an underlying asset on the x-axis and the value of a position taken to hedge against risk exposure on the y-axis. Also used with changes in value. See: Risk profile.

Binary options have discontinuous payoff profile. The holder of a European binary call option pays the holder nothing if the asset price ends up below the strike price at maturity and a fixed amount if it ends up above.

In option pricing, a graph of the value of the option position at expiration as a function of the underlying asset price.
Payoff profile ...

See: Payoff profile. Risk-return trade-off The tendency for potential risk to vary directly with potential return, so that the more risk involved, the greater the potential return, and vice versa.

See also: Banks, Long position, Ask price, Parallel loan, Closing price