Lookback options have payoffs that
A)depend in part on the minimum or maximum price of the underlying asset during the life of the option.
B)only depend on the minimum price of the underlying asset during the life of the option.
C)only depend on the maximum price of the underlying asset during the life of the option.
D)are known in advance.
E)none of the above.

Question

Quizplus · Accepted Answer

Lookback options have payoffs that depend on the minimum or maximum price of the underlying asset during the life of the option. This means that the option holder can choose to exercise the option at any point during the option's life, based on whether the underlying asset has reached its lowest or highest point. The specific terms of the option are not known in advance, as they are based on the actual performance of the underlying asset. Therefore, option holders must carefully monitor the price of the underlying asset in order to determine the best time to exercise the option.

Lookback Options Have Payoffs That