In the Case of Look Back Option

question 25

Multiple Choice

In the case of look back option:

• A) the option holder must decide before maturity whether the option is a call or a put.
• B) the option holder chooses as the exercise price any of the asset prices that occurred before the final date.
• C) the option payoff is zero if the asset price is on the wrong side of the exercise price and otherwise is a fixed sum.
• D) the exercise price is equal to the average of the asset's price during the life of the option.

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Definitions:

Recoveries of Net Working Capital

The process of reclaiming cash invested in net working capital components, such as accounts receivable, and reducing accounts payable.

Operating Cash Flow

The amount of cash generated by a company's normal business operations, used to assess the company's ability to generate sufficient positive cash flow to maintain and grow its operations.

Net Working Capital

Net working capital is a measure of a company's liquidity, operational efficiency, and short-term financial health, calculated as current assets minus current liabilities.

Top-Down Approach

An investment strategy that starts with global economics before identifying specific sectors and companies for investment.