Explanation:
The correct answer is D.
A Bermudan option is a non-standard American option, which can only be exercised at certain dates until its expiration. This type of option is a hybrid of American and European options. Like American options, Bermudan options can be exercised before the expiration date. However, unlike American options, which can be exercised at any time before expiration, Bermudan options can only be exercised on specific predetermined dates (e.g., quarterly, on coupon payment dates, etc.).
Q.787 Ganesh Singh is a junior options trader at an Indian brokerage house. He was recently promoted from the equity division to the derivatives unit of the firm. One of her clients asked Singh to take a long position on his behalf in a Bermudan option. Since Singh is unfamiliar with Bermudan options, describe the unique feature of these types of options.
A
A Bermudan option is a non-standard European option, which can be exercised any time until its expiration.
B
A Bermudan option is a non-standard American option, which can be exercised any time until its expiration.
C
A Bermudan option is a non-standard European option, which can only be exercised at certain dates until its expiration.
D
A Bermudan option is a non-standard American option, which can only be exercised at certain dates until its expiration.
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