18 Questions
Which of the following best defines a Compound Option?
An option with an underlying asset that is another option
If the starting time of a compound option is greater than 0, what type of compound option is it?
Deferred compound option
What does 't1' represent in a compound option?
Expiry of the compound option
In a call-on-call option, what is needed for the option to have a payoff?
Two specific events to occur
What is the purpose of the rebate feature in options when the barrier is hit?
To add an additional payment to the option holder
In a compound option, what does 'St' represent?
Price of the underlying asset at time t
What is the payoff of a down-and-in call option with a barrier of 39 and a strike price of 40 when the underlying asset price is 41?
$0
In a down-and-out put option with a barrier of 39 and a strike price of 40, what is the payoff if the underlying asset price in 3 months is 35?
$0
For an up-and-in call option with a barrier of 41 and a strike price of 40, what is the payoff when the asset price is 42?
$0
Calculate the price of a 3-month up-and-out put option with a barrier of 41 and a strike price of 40 if the underlying asset price remains at 38 throughout.
$0
For a put-on-put option with a strike price of 40, what is the payoff if the underlying asset price in 3 months is 41 and in 9 months is 36?
$-5
In a call-on-put option scenario with a strike price of 40, what is the payoff when the underlying asset price is 37 in 3 months and 36 in 9 months?
$-1
What is the correct formula for standard look-back call payoff?
max{0, ST - m}
In an extreme look-back put option, what does the payoff formula represent?
Maximum difference between the strike price and the minimum value of the underlying asset
What is the value of the underlying asset at expiration (ST) given S0 = 150 and S3 = 200?
$200
For an extreme look-back call option with a strike price of 100, what is its payoff if the maximum value of the asset over the period is 210?
$110
What is the sum of the payoffs for a standard look-back put, an extreme look-back call with a strike of 100, and an extreme look-back put with a strike of 100 given ST = 200, max = M = 210, min = m = 120?
$90
In a look-back option, what does 'm' represent?
Minimum value of the underlying asset
Explore the concept of look-back options in finance, which have payoffs based on the minimum or maximum value of a variable over a period of time. Learn about standard look-back call and put payoffs and how they are calculated.
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