medium · Quantitative Finance
A digital (binary) call option pays 100 if the stock price S_T > K at expiry and 0 otherwise.
Given S_0 = 50, K = 52, r = 4%, T = 0.5, and a risk-neutral probability of finishing in-the-money of 42%, what is the fair price of the option?
- 42.00
- 38.50
- 41.19
- 50.00
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