A digital put pays 1 if spot is below the strike at expiry, Engineering Mathematics

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A digital put pays 1 if spot is below the strike at expiry

Let P be a digital put struck at K₁ and C be a digital call struck at K₂. (A digital put pays 1 if spot is below the strike at expiry, and a digital call pays I if spot is above the strike.) What can we say about the prices of C and P in each of the following cases?

(i) K₁ = K₂;

(ii) K₁ ₂;

(iii) K₁ > K₂.

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Engineering Mathematics: A digital put pays 1 if spot is below the strike at expiry

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Engineering Mathematics: A digital put pays 1 if spot is below the strike at expiry

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