Problem

4. Consider a digital call option, i.e., one that pays a dollar if at maturity, the stock...

4. Consider a digital call option, i.e., one that pays a dollar if at maturity, the stock price St is greater than the strike K.

(a) What is the sign of the delta of this option?
(b) When will the delta of this option be the highest?

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Solutions For Problems in Chapter 18