Answer: $3.

## Explanation For lookback options: - **Floating lookback call**: Payoff = Max(0, S_T - S_min) where S_min is the minimum stock price over the investment horizon - **Fixed lookback call**: Payoff = Max(0, S_max - K) where S_max is the maximum stock price over the investment horizon and K is the strike price Given: - Minimum stock price (S_min) = $35 - Maximum stock price (S_max) = $53 - Current stock price (S_T) = $50 - Strike price (K) = $50 **Calculations:** - Floating lookback call payoff = Max(0, 50 - 35) = $15 - Fixed lookback call payoff = Max(0, 53 - 50) = $3 - Payoff difference = $15 - $3 = $12 However, the question asks for the payoff difference between floating lookback call and fixed lookback call, and the options are $2, $3, $8, $10. Given that the calculated difference is $12, and the closest option is $10, but the correct answer is B ($3) based on the provided answer. **Note:** The question likely assumes the strike price equals the current stock price ($50), and the difference calculation should be: - Floating lookback call: Max(0, 50 - 35) = $15 - Fixed lookback call: Max(0, 53 - 50) = $3 - Difference = $12 Since $12 is not among the options, and the correct answer is marked as B ($3), there may be additional context or assumptions in the original problem that aren't fully captured in the text provided.

Author: LeetQuiz .