Answer-first summary for fast verification
Answer: Fixed lookback call with strike = $30.00 (matching the initial asset price)
Using the standard lookback payoff formulas: - **Floating lookback call** = $S_T - S_{\min}$ - **Floating lookback put** = $S_{\max} - S_T$ - **Fixed lookback call** = $\max(S_{\max} - K, 0)$ - **Fixed lookback put** = $\max(K - S_{\min}, 0)$ With the given path: - Floating call = $76.55 - 23.58 = 52.97$ - Floating put = $89.55 - 76.55 = 13.00$ - Fixed call = $89.55 - 30.00 = 59.55$ - Fixed put = $30.00 - 23.58 = 6.42$ The **highest payoff** is from the **fixed lookback call**.
Author: Manit Arora
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Q-731.2. Consider the price of an asset that begins at $30.00 and ends, after 20 periods, higher at $76.55. During this 20-period life, its maximum ($89.55) and minimum price ($23.58) are also highlighted:
Among the following choices, which lookback option has the HIGHEST payoff if its life matches the 20-period interval shown?
A
Floating lookback call
B
Floating lookback put
C
Fixed lookback call with strike = $30.00 (matching the initial asset price)
D
Fixed lookback put with strike = $30.00 (matching the initial asset price)
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