The Delta of a Up-And-Out Call Option with Barrier $H$ Lying Above the Strike

question 1

Multiple Choice

The delta of a up-and-out call option with barrier $H$ lying above the strike $K$ is most likely to be negative when

• A) The underlying stock price \(S\) is at or near \(K\) .
• B) The underlying stock price \(S\) is close to and less than \(H\) .
• C) The underlying stock price \(S\) is well below \(K\) .
• D) The delta of a call cannot be negative.

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Definitions:

Circular Flow Diagram

The circular flow diagram is an economic model that shows how money moves through an economy between producers and consumers, illustrating the continuous flow of goods and services and financial transactions.

Revenue

The income that an organization receives from its normal business activities, usually from the sale of goods and services.

Insurance

A contractual arrangement providing financial protection against losses or damages from specific risks, in exchange for premium payments.

Tolerance for Risk

is the degree to which an individual, investor, or organization is willing to endure uncertainty and potential losses in pursuit of potential gains.