Explanation:
A cash-or-nothing put is a type of binary option that pays a fixed amount if the price of the asset is below the strike price at the expiration date and nothing if the price is above the strike price at expiry.
Option A is incorrect: An asset-or-nothing call pays off the value of the underlying asset if the price of the asset is above the strike price at expiration, and nothing if the asset price is less than the strike price.
Option B is incorrect: An asset-or-nothing put binary option pays an amount equal to the asset price if the price of the underlying asset is below the strike price at the expiration date and nothing if the price is above the strike price at expiry.
Option C is incorrect: A cash-or-nothing call pays a fixed amount of cash if the price of the underlying asset is above the strike price at expiration, and pays nothing if the asset price is below the strike price.
Q.798 Hakim Ahmed is a junior derivatives trader who has recently started trading exotic options. A week ago, he purchased an exotic option that pays off nothing if the price of the underlying asset exceeds the strike price at a predetermined date and pays a fixed amount if the underlying asset price is below the strike price. Which of the following options has he purchased?
A
Asset-or-nothing call binary option.
B
Asset-or-nothing put binary option.
C
Cash-or-nothing call binary option.
D
Cash-or-nothing put binary option.
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