A Cliquet Is Equivalent to a Family of Forward Starting

question 19

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.

---

Definitions:

Diffusion of Responsibility

A psychological phenomenon where individuals are less likely to take action or feel responsible in situations where others are present.

Seizure

A sudden surge of electrical activity in the brain resulting in a temporary disturbance of motor, sensory, or mental function.

Obstacles to Helping

Factors that inhibit individuals from providing aid or assistance to others in need.

Live Models

Individuals who demonstrate or perform actions in real-time as examples for learners or observers, often used in educational and training contexts.