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Consider the European digital option that pays a constant H if the stock price is above strike price X at maturity and zero otherwise. Assuming
Consider the European digital option that pays a constant H if the stock price is above strike price X at maturity and zero otherwise. Assuming stock price S follows the following SDE under physical measure dS/S = mu dt + sigma dB_t Assuming the risk-free rate is constant r. Please write down the price of this option and explain how it is related to the price of the standard Black-Scholes European call option
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