Double digital option

Double digital option

A double digital option is a particular variety of option (a financial derivative). At maturity, the payoff is 1 if the spot price of the underlying asset is between two numbers, the lower and upper strikes of the option; otherwise, it is 0.

A double digital with lower strike K1 and upper strike K2 can be replicated by going long a digital option with strike K1 and short another digital option with strike K2.

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