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Digital call price from a digital put at 0.36

Question

A digital put pays 11 if ST<KS_T<K and nothing otherwise; the matching digital call pays 11 if ST≥KS_T\ge K. The digital put costs 0.360.36 and a bond paying 11 at expiry costs 0.90.9. What should the digital call cost?

Short answer

0.540.54. Together the digital call and put pay 11 in every state, exactly like the bond, so their prices sum to 0.90.9 and the call costs 0.9−0.36=0.540.9-0.36=0.54.

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

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