The solution to the question follows easily by realizing that it is a special case of a Bull-spread (one with gradient of middle payoff <1) + a digital option.
However I tried replicating as well,
Payoff Digital Option C(8580) C(14300) Total
0.9J<8580 7722 0 0 7722
8580<=0.9J<14300 7722 0.9J - 8580 0 *0.9J - 8580
8580<=0.9J 7722 0.9J - 8580 14300 - 09J *12870
*The last two don't add up, please help.
Last edited by a moderator: Feb 11, 2013