After Presenting the payoff, we will establish some methods to evaluate, hedge and risk manage the digital risk.This article is the first part of the answer. It is focus on the digital pricing and hedging

The correlation after the subprime crisis 2007 became a major parameter. Most part of the time estimate historically, this parameter was free to the user. In the case of Multi Asset Multi factor stochastic model, some instantaneous correlation are not calibrated or very difficult to implied. In...