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Consider a Floating-Strike Lookback Put Option Written on a Stock SmaxS ^ { \mathrm { max } }

Question 1

Multiple Choice

Consider a floating-strike lookback put option written on a stock.Let SmaxS ^ { \mathrm { max } } and SminS ^ { \mathrm { min } } denote the maximum and minimum prices of the stock over the option's life.Then,the payoff to the option holder is given by max{XY,0}\max \{ X - Y , 0 \} ,where


A) X=SmaxX = S ^ { \max }
And
Y=KY = K
,the given strike price of the option.
B) X=KX = K
And
Y=Smin Y = S ^ { \text {min } }
)
C) X=SmaxX = S ^ { \max }
And
Y=STY = S _ { T }
,the price of the underlying at maturity.
D) X=STX = S _ { T }
And
Y=Smin Y = S ^ { \text {min } }
)

Correct Answer:

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