A Cliquet Is Analogous to

question 26

Multiple Choice

A cliquet is analogous to

• A) A portfolio of vanilla options, all at-the-money today, and expiring on the reset dates of the cliquet.
• B) A portfolio of digital options, with one option coming to life at each reset date and expiring at the next reset date.
• C) A portfolio of forward-starts, with one option coming to life at each reset date and expiring at the next reset date.
• D) A portfolio of exchange options, with one option coming to life at each reset date and expiring at the next reset date.

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Definitions:

Disposable Income

Funds that households can direct towards their saving and spending ambitions after income taxes are accounted for.

Consumption

The portion of income spent on goods and services rather than saved.

Billion

A number equivalent to one thousand million (1,000,000,000) or, in some number systems, a million million (1,000,000,000,000).

Saving

The portion of income not spent on current consumption but set aside for future use, often in a deposit account or as an investment.