Consider the Following At-The-Money Options,all of the Same Maturity: a Vanilla

question 12

Multiple Choice

Consider the following at-the-money options,all of the same maturity: a vanilla European call ( $C _ { E }$ ) ,an American vanilla call ( $C _ { A }$ ) ,a fixed-strike lookback call ( $C _ { L }$ ) .Which of the following is correct?

• A) \(C _ { L } \leq C _ {E } \leq C _ { A }\).
• B) \(C _ { L } \leq C _ {E } \leq C _ { A }\)
• C) \(C _ {E } \leq C _ { A } \leq C _ { L }\)
• D) \(C _ { A } \leq C _ { E } \leq C _ { L }\).

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Definitions:

Normative Economics

A branch of economics that focuses on what ought to be or what should be, often based on value judgments and opinions.

Positive Economics

A branch of economics that focuses on factual and cause-and-effect relationships, avoiding value judgments about what ought to be.

Production Possibility

A concept representing the various combinations of goods and services an economy can produce, given certain resources and technology.

Linear Production

A production process where inputs are combined in fixed proportions and the output level changes linearly with changes in input levels.