You Hold a Fixed-Strike Lookback Put Option Written on a Stock

question 2

Multiple Choice

You hold a fixed-strike lookback put option written on a stock that was at-the-money at inception. The stock price at inception was $56, the stock price at maturity is $63, and the lowest and highest stock prices observed over the option's life are, respectively, $52 and $64. The payoff from the option at maturity is

• A) Zero.
• B) $4.
• C) $8.
• D) $11.

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Definitions:

Percentile

A statistical measure indicating the value below which a given percentage of observations in a group of observations falls.

Normal Curve

A bell-shaped curve that represents the distribution of many types of data in which most values cluster around a central mean.

Standard Deviation

A statistic that measures the dispersion or variation from the average in a set of data, indicating how spread out the numbers are.

Test-retest Reliability

The consistency of a psychological test or assessment over time when administered to the same group of people.