In the 1990s,a Number of Companies Which Had Experienced Sharp

question 29

Multiple Choice

In the 1990s,a number of companies which had experienced sharp stock price declines,"repriced" previously-awarded employee stock options.Repricing consisted of resetting the options' strike prices to the current stock price (so as to bring them closer to the money) .Suppose a company awards at-the-money stock options to its employees and decides it will reprice them if the stock price falls 50% from the initial award date.Then,the employee stock option is equivalent to a portfolio of

• A)A vanilla call and a forward-starting call.
• B)A knock-out and a knock-in barrier call option.
• C)A knock-out call and a forward-strarting call.
• D)A cliquet.

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Definitions:

Sesamoid Bone

A small, round bone embedded within a tendon or muscle, typically found in locations where a tendon passes over a joint, such as the knee or hand.

Meatus

A meatus refers to a natural body passage or opening, such as the urinary meatus in the urethra or the nasal meatus in the nasal cavity.

Foramen

A natural opening or passage, especially in a bone, through which nerves or blood vessels may pass.

Yellow Bone Marrow

A type of bone marrow primarily composed of fat cells, which serves as a storage reserve of fats and contributes to energy supply.