Answer: Asian options must be cash settled, For the same maturity and path, the Asian average strike call cannot pay more than the floating lookback call, An AVERAGE STRIKE Asian call does NOT have an initial, fixed strike price

### Correct answers - **A: True** - **B: True** - **C: False** - **D: True** ### Explanation **A. Asian options must be cash settled — True** Asian options are generally settled in cash because the payoff is based on an average price rather than physical delivery at a single exercise price. **B. For the same maturity and path, the Asian average strike call cannot pay more than the floating lookback call — True** A floating lookback call has payoff based on the **minimum price** over the life of the option, while an average strike Asian call uses the **average price** as the strike. Since the average is typically greater than or equal to the minimum, the lookback call payoff cannot be lower than the Asian average strike call payoff for the same path. **C. An AVERAGE PRICE Asian call does NOT have an initial, fixed strike price — False** An average price Asian call **does** have a fixed strike price established at inception. Its payoff is typically of the form: \[ \max(0, \bar{S} - K) \] where \(K\) is the fixed strike. **D. An AVERAGE STRIKE Asian call does NOT have an initial, fixed strike price — True** An average strike Asian call uses the average price as the strike, so it does **not** have a fixed strike agreed at inception. So the truth pattern is **A, B, and D are true; C is false**.

Author: Manit Arora