If You Buy a Knock-Out Call Option with Barrier $H$ Satisfying $H > K = S$

question 22

Multiple Choice

If you buy a knock-out call option with barrier $H$ satisfying $H > K = S$ where $K$ and $S$ are the strike price and current price of the underlying,respectively,then your implied view of prices is that

• A)Prices are going up to at least the level of the barrier.
• B)Prices are going up,but at most to the level of the barrier.
• C)Prices are moving down.
• D)Prices may move up to the level of the barrier before moving down.

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Definitions:

Volume-Based Measures

Metrics that quantify outcomes or activities based on the amount or volume of production, sales, or other business operations.

Activity Rate

A ratio used to allocate costs to products or services based on the activities that are required to produce them.

Cost Pool

A grouping of individual costs in accounting, typically by department or service center, from which costs are allocated to products or services based on a relevant allocation base.

Overhead Costs

Expenses associated with the day-to-day running of a business that are not directly linked to the production or selling of goods and services.