TD - Continuous time pricing formula for an option
QUESTION
(fiddly!) Using the fundamental solution representation, calculate the continuoustime pricing formula for an option which has a payoff at maturity of
payoff (Sr) =
−1, 0 < Sr < K − 1
Sr − K, K − 1 ≤ Sr < K + 1
+1, K + 1 ≤ Sr