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The payoff of a leveraged European call option is given below. C L (T) = mS(T) - K if S(T) > K and = 0

The payoff of a leveraged European call option is given below.

CL (T) = mS(T) - K if S(T) > K and = 0 if S(T) < K, where K is the strike price and m is a constant.

The payoff of a digital call option is:

CD (T) = 1 if S(T) > K and = 0 if S(T) < K

Replicate the payoff of the leveraged option at date zero using a combination of standard and digital European call options both with strike price K.

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