A Cliquet Is Equivalent to a Family of Forward Starting

question 6

Multiple Choice

A cliquet is equivalent to a family of forward starting options in which one option comes to life at each reset date and expires on the next reset date.A reverse cliquet

• A)Is a portfolio of vanilla put options,all at-the-money today,and expiring on the reset dates of the reverse cliquet.
• B)Is a portfolio of digital put options,with one option coming to life at each reset date and expiring at the next reset date.
• C)Is a cliquet that runs in reverse,with options expiring at each reset date whose strike is determined only at the next reset date.
• D)Has an identical structure to the cliquet but in which there is a promised fixed return at expiry that is reduced by the moneyness at expiry of each forward starting option in the cliquet.

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Definitions:

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