Which of the following statements about backdating is most valid?
A) A backdated option is one that is issued prior to today.
B) Backdating usually involves the issuance of an option with a prior issue date and lower strike than today's price.
C) Backdating usually involves the ex-post issuance of an out-of-the-money option.
D) A backdated option is exactly the same as a fixed-strike lookback option.

Question

Quizplus · Accepted Answer

Backdating typically involves issuing an option with an earlier issue date and lower exercise price than its current market value. This practice is often used to provide executives with more favorable compensation packages. Option backdating is illegal in some cases, as it can artificially inflate the value of the executive's compensation, which can lead to securities fraud charges or civil litigation.

Which of the Following Statements About Backdating Is Most Valid