An Option Is Said to Be Path-Dependent If

question 11

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.

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Definitions:

Firm

An enterprise like a corporation, partnership, or sole proprietorship involved in commercial, industrial, or professional operations.

AFC

stands for Average Fixed Cost, which is the fixed cost per unit of output, calculated by dividing total fixed costs by the quantity of output produced.

Output Rises

Refers to an increase in the production level of goods and services over a certain period.

Output Rises

An increase in the production of goods and services within an economy.