Say, an investment bank sell Digital Call Option to its client at strike 100. But trader at the bank want to book the deal with a call spread at 99/100 (price&hedge Digital Option like price&hedge a call spread) because trader believe that it will help smoothing hedging.
How should risk manager at the bank measure the risk?
a digital option as it is an actual contingent obligation?
or a call spread as it is what trader book the deal?