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Easy · derivatives · Quant Researcher interview question · options, pricing, black-scholes, quantitative
Digital options, or binary options, are exotic derivatives with discontinuous payoffs that depend on whether the underlying asset price satisfies a specific condition at maturity. These instruments are widely used in quantitative finance for hedging specific price levels and constructing complex payoff profiles. Pricing them under the Black-Scholes framework involves calculating the probability of the option expiring in-the-money, adjusted for risk-neutral valuation. Task Implement the function