Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch26

Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch26 -...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Hull: Options, Futures, and Other Derivatives, Ninth Edition Chapter 26: Exotic Options Multiple Choice Test Bank: Questions with Answers 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 Answer: B An Asian option is an option whose payoff is calculated from the average value of a variable over a period of time 2. As the barrier is observed more frequently, which of the following is true of a knock-out option As the barrier is observed more frequently it is more likely to be hit. A knock-out option therefore becomes less valuable 3. There are two types of regular options (calls and puts). How many types of compound options are there? There are four: call on call, call on put, put on call, and put on put 4. There are two types of regular options (calls and puts). How many types of barrier options are there?
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
There are eight: up and in call, up and in put, down and in call, down and in put, up and out call, up and out put, down and out call, and down and out put. 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 Answer: C The holder gets the intrinsic value at the time of the shout or the usual final payoff whichever is greater. In this case the holder gets 40−30 = $10 6. A floating lookback call option pays off which of the following A floating lookback call pays off the amount by which the maximum stock price exceeds the final stock price
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern