Chapter 22 Exotic Options and Other Nonstandard Products

1) An Asian option is a term used to describe which of the following?

A) An option where the payoff depends on whether a barrier is hit

B) An option where the payoff depends on the average value of a variable over a period of time

C) An option that trades on an exchange in the Far East

D) Any option with a nonstandard payoff

2) As the barrier is observed more frequently, a knock out option becomes which of the following?

A) More valuable

B) Less valuable

C) There is no effect on value

D) May become more valuable or less valuable

3) There are two types of regular options (calls and puts). How many types of compound options are there?

A) Two

B) Four

C) Six

D) Eight

4) There are two types of regular options (calls and puts). How many types of barrier options are there?

A) Two

B) Four

C) Six

D) Eight

5) In a shout call option the strike price is $30. The holder shouts when the asset price is $40. What is the payoff from the option if the final asset price is $35?

A) $0

B) $5

C) $10

D) $15

6) A floating lookback put option pays off which of the following?

A) The amount by which the final stock price exceeds the minimum stock price

B) The amount by which the maximum stock price exceeds the final stock price

C) The amount by which the strike price exceeds the minimum stock price

D) The amount by which the maximum stock price exceeds the strike price

7) A fixed lookback put option pays off which of the following?

A) The amount by which the final stock price exceeds the minimum stock price

B) The amount by which the maximum stock price exceeds the final stock price

C) The amount by which the strike price exceeds the minimum stock price

D) The amount by which the maximum stock price exceeds the strike price