Consider a Down-And-Out Call and a Down-And-In Call with a Current

question 4

Multiple Choice

Consider a down-and-out call and a down-and-in call with a current stock price $S$ , barrier $H < S$ , and strike $K > H$ . When does the knock-out option increase in price and the knock-in decrease in price?

• A) When the stock price increases.
• B) When the volatility increases.
• C) When the barrier increases.
• D) When the strike increases.

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Definitions:

William James

A pioneering psychologist and philosopher who was a leading thinker of the late 19th century and is often referred to as the "Father of American psychology."

Self

The individual's awareness of their own identity and personal attributes.

Certainty

The state of being absolutely confident or sure about something.

Material Self

The extension of the self into the body, clothes, and possessions.