# Price of a risk arbitrage call

Let’s say I know that the probability of a merger-acquisition happening is p=1/4, the payoff i’d get in 6M (the time of the merger announcement) is 30. If the merger fails (q=1-p=3/4), my payoff is -10. What is the price of the call? And what are the risks involved and hedge?

Your product is not a call, whose payoff would be of the form $Max(S-K,0)$, it is more like a binary option.