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A digital (European) option is an option which would pay nothing if the option is OTM...

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Finance

A digital (European) option is an option which would pay nothingif the option is OTM upon expiration and pays a predeterminedconstant amount M if the underlying asset finished ITM.

Graph the payoffs of a digital call option (long and short) withstrike price X.

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3.9 Ratings (443 Votes)
Assume Amount of Payment M10Strike Price X100Digital Long Call OptionAssume Price at expiration SIf    See Answer
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