
Explanation:
A Parisian call option is a type of barrier option, which specifies how long (in days) the price of the underlying must stay above or below the barrier price before the option can be activated or canceled. For the barrier feature (knock in or knock out) to be triggered, the underlying asset has to spend a certain prescribed time beyond the barrier. This makes manipulation of the trigger price much harder.
Option A is incorrect. A down-and-out call option is a European call option that gets knocked out if the underlying falls to the barrier price during the life of the option.
Option B is incorrect. An up-and-out call gets knocked out (ceases to exist) if the underlying moves above the barrier price during the life of the contract.
Option D is incorrect. A down-and-in call option is only activated (becomes viable) if the underlying falls to the barrier level during the life of the option.
In all standard barrier options (down-and-out, up-and-out, up-and-in, and down-and-in options), the asset price doesn't have to remain above or below the barrier for a specified number of days before the option can be knocked in or out. That's one of the most important differences between them and Parisian options.
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Q.24 In which of the following barrier options will a regular call option cease to exist if the underlying asset's price falls below a specific barrier price for a specific number of days?
A
Down-and-out call option.
B
Up-and-out call option.
C
Parisian call option.
D
Down-and-in call option.