LONDON, Feb 4 (Reuters) – Industry Loss Warranties should be treated as binary options and use capital market methodology to price the contracts in order to attract a new “new breed of trader”, according to a paper.

“The Industry Loss Warranty marketplace requires a more transparent and consistent method of determining forecast industry losses in order to provide an efficient means of pricing ILWs,” the paper, published by Hamish Raw on www.binaryoptions.com said.   

The paper argues that both ILWs and binary options are structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money..

Souce: Mortimer, Sarah(Thompson Reuter, February 2013)