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# Strike price

In the context of derivatives the strike price of an option is a key variable in a financial contract between two parties. Typically an option has positive monetary value if an underlying financial instrument (e.g. a stock price, interest rate or inflation rate) has a value above (or below depending on the particular type of contract, but not both) the strike price.

In the context of a call option, the payoff is [itex](S-K)^{+}[/itex] where S is the final of the underlying, K is the strike and where

[itex]()^+(x)=\{^{x\ if\ x\geq 0}_{0\ otherwise}[/itex]

For a put option the corresponding payoff is [itex](K-S)^{+}[/itex]

For a digital option[?] [itex]1_{S\geq K}[/itex] where [itex]1_{\{\}}[/itex] is the indicator function.

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