An Option Is Said to Be Path-Dependent If

question 5

Multiple Choice

An option is said to be path-dependent if

• A)It has a payoff that depends in some way on the path of prices taken by the underlying.
• B)It can only be priced on a non-recombining tree.
• C)Different paths of the asset price necessarily lead to different payoffs.
• D)All of the above.

---

Definitions:

Law Of Effect

The principle that behaviour followed by pleasant consequences is likely to be repeated; behaviour followed by unpleasant consequences is not.

Behaviour

Refers to the actions or reactions of an object or organism, often in relation to the environment or stimuli.

Pleasant Outcomes

The positive results or benefits achieved from a specific action, decision, or event.

Unpleasant Outcomes

Negative or undesirable results that arise from certain actions or decisions, often leading to dissatisfaction or adverse effects.