Transform the American cash-or-nothing call into a linear complementarity problem for the diffusion equation
Transform the American cash-or-nothing call into a linear complementarity problem for the diffusion equation and show that the transformed payoff is g(x,τ) = be^[(1/2)((k+1)^2)τ+(1/2)(k−1)x]H(x), ￼￼ ...
Firstly, I do not have a quant finance background. This is new to me, and I imagine that this is a basic question for this group. I am calculating the price of a binary/digital option with ...
How is holding an European call option equivalent to holding an asset-or-nothing call option and writing a cash-or-nothing call option?
The cash-or-nothing call option has a payoff that is equal to the strike price. All three options have the same expiry date.