A Path-Independent Option Is

question 35

Multiple Choice

A path-independent option is

• A) An option where the price process is not continuous, i.e., it does not follow a smooth path, but jumps from one value to the next.
• B) An option where the option payoff depends on the price of the underlying asset at exercise time but not on the details of the price path followed to that point.
• C) An option where the option payoff is independent of anything that happens to the price of the underlying after inception.
• D) An option where the option payoff is constant regardless of the path taken by the price of the underlying.

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Definitions:

Denominator Degrees

This key term does not appear to be standard; however, it may refer to the denominator in statistical formulas where degrees of freedom are considered.

Estimated Form

In statistics, it refers to the version of an equation that estimates the parameters of a model based on sample data.

Unit

A standard measurement or quantity used as a basis for counting, comparison, or calculation.

Critical Value

A threshold point on the test distribution that is compared against the test statistic to determine whether to reject the null hypothesis.