5. Review the derivation of digital calls and puts in the study guide and use these results to derive a general expressi

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5 Review The Derivation Of Digital Calls And Puts In The Study Guide And Use These Results To Derive A General Expressi 1 (22.18 KiB) Viewed 9 times

5. Review the derivation of digital calls and puts in the study guide and use these results to derive a general expression for an option position that at expiration pays (i) two (2) units of currency below K₁, (ii) nothing between K, and K₂ where K₁ < K₂, and (iii) four (4) units of currency above K₂. Note: digital options have come up in job interviews and financial economics exams. It is a good idea to be familiar with these derivations.