Answer-first summary for fast verification
Answer: $\max[0, S(s) - K] + S(T) - S(s)$
**Correct answer: A** For a call shout option, the holder can lock in the intrinsic value at the shout time and still benefit from any upside after the shout. The payoff can be written equivalently as: - $\max[0, S(T) - S(s)] + [S(s) - K]$ - $S(s) - K + \max[0, S(T) - S(s)]$ - $\max[0, S(T) - K, S(s) - K]$ Option **A** is not generally correct because it adds the post-shout change in stock price to the shouted intrinsic value in a way that does not match the standard call shout payoff structure.
Author: Manit Arora
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Q-18.2 If we assume that , is asset price at time of an in-the-money shout triggered by the option holder prior to expiration, and is the asset price at maturity, each of the following gives the payoff of a CALL SHOUT option EXCEPT FOR:
A
B
C
D
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