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Write down the price of this option and explain how it is

Question: 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 prices follows the following SDE under physical measure

dS/S = μdt + σdB_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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Finance Basics: Write down the price of this option and explain how it is

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Finance Basics: Write down the price of this option and explain how it is

Reference No:- TGS02578040

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