Cliquet options are purchased because
A)A portfolio of forward start options is cheaper than buying them separately.
B)There is diversification in a portfolio of forward start options.
C)They are analogous to owning Asian forward options.
D)It is the same as buying rolling forward start options but has the advantage of locking in possibly low volatilities today.

Question

Quizplus · Accepted Answer

Cliquet options provide the advantage of locking in potentially low volatilities today, which is similar to buying rolling forward start options. However, purchasing cliquet options is more cost-effective than buying forward start options separately, and there is less diversification involved. Additionally, owning cliquet options is not directly analogous to owning Asian forward options.

Cliquet Options Are Purchased Because