Explanation:
By buying both a down-and-in and down-and-out puts, the investor ensures that under all states of the world, he owns an active put option.
(Book 3, Module 41.2, LO 41.e)
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Question 18
Which of the following combinations results in a regular European put option? Assume barrier levels and strike prices are all the same.
A
Long down-and-in barrier put and short down-and-out barrier put.
B
Long down-and-in barrier put and long down-and-out barrier put.
C
Short down-and-in barrier put and long down-and-out barrier put.
D
Long down-and-in barrier put and long down-and-in barrier put.
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