A cliquet is analogous to
A) A portfolio of vanilla options, all at-the-money today, and expiring on the reset dates of the cliquet.
B) A portfolio of digital options, with one option coming to life at each reset date and expiring at the next reset date.
C) A portfolio of forward-starts, with one option coming to life at each reset date and expiring at the next reset date.
D) A portfolio of exchange options, with one option coming to life at each reset date and expiring at the next reset date.

Question

Quizplus · Accepted Answer

A cliquet is analogous to a portfolio of forward-start options, where each option in the portfolio starts (comes to life) at each reset date and expires at the next reset date. This structure allows for the locking in of gains (or losses) at each reset period, similar to how a series of forward-start options would operate.

A Cliquet Is Analogous to