how to replicate a digital option by plain vanila calls and puts ?
Using two european call options with same maturity, strike price K, and K+
det_K.
Long 1/delt_K number of C(K,T) and short the same number of C(K+delt_K,T).
As long as delt_K is very small,(i.e. goes to 0), this portfolio goes to a
digital option.
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