A down-and-out option _______________.
A) provides a payoff if the firm's stock price falls below some specified percentage of what it was at the beginning of the option term
B) provides a payoff if the firm's stock price falls below some specified dollar amount during the term of the option
C) expires worthless if the firm's stock price falls below some specified percentage of what it was at the beginning of the option term
D) expires worthless if the firm's stock price falls below some specified dollar amount during the term of the option

Question

Quizplus · Accepted Answer

A down-and-out option is a type of barrier option that becomes worthless if the underlying asset's price falls below a certain barrier level, which is specified as a dollar amount, during the option's term.

A Down-And-Out Option _______________