medium · Quantitative Finance

What happens to the Feynman-Kac solution if the terminal payoff f(X_T) is a constant value K?

1. The solution is simply the present value of K, which is K e^-r(T-t).
2. The solution becomes the spot price of the underlying S_t.
3. The solution is zero because there is no uncertainty.
4. The solution is K, because discounting only applies to random variables.

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