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Pricing and hedging a digital · Part 3 of 3
A one-year digital call pays $1 if a stock, now at $100, finishes above $100. Rates are zero and at-the-money implied volatility is 20%.
Now the smile is skewed: implied volatility falls by 0.2 volatility points for each $1 rise in strike. The at-the-money vega is 39.7 per unit of volatility. What is the digital worth now?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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