A number of companies were accused of "backdating" executive stock options in the 2000s.Backdating is the procedure by which companies chose the date on which the stock was was most favorable (i.e. ,at its lowest)to act as the putative start date of the option grant.By permitting backdating,companies were essentially giving their executives a form of a
A)Cliquet option.
B)Shout option.
C)Floating-strike lookback option.
D)Fixed-strike lookback option.

Question

Quizplus · Accepted Answer

Backdating executive stock options to a date when the stock price was at its lowest is akin to a floating-strike lookback option. This type of option allows the holder to "look back" over the life of the option and select a favorable exercise price, which in the case of backdating, would be the lowest stock price.

A Number of Companies Were Accused of "Backdating" Executive Stock