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 essentially allows the executives to benefit from the lowest possible purchase price, similar to a floating-strike lookback option, which allows the holder to "look back" over the life of the option and select a purchase price at the lowest level.

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