rahul.goyl
Member
Hi David,
Could you plz explain I & II.
Which of the following are not the characteristics of catastrophe options?
I.They have payoffs linked to an index of underwriting losses written on a large pool of insurance policies
II.They trade like a catastrophe call spread, combining a long call option position with a shorter call at a higher price.
III.Their payoff has unlimited upside potential.
IV.Cat Options show high correlation to the S & P equity index.
Choose one answer.
a. III and IV.
b. I, II, and IV.
c. I and II.
d. 1, II, III, and IV:
The answer is III and IV. Their payoff has limited rather than unlimited upside potential ;Cat Options show no correlation to the S & P equity index.
Regards,
Rahul
Could you plz explain I & II.
Which of the following are not the characteristics of catastrophe options?
I.They have payoffs linked to an index of underwriting losses written on a large pool of insurance policies
II.They trade like a catastrophe call spread, combining a long call option position with a shorter call at a higher price.
III.Their payoff has unlimited upside potential.
IV.Cat Options show high correlation to the S & P equity index.
Choose one answer.
a. III and IV.
b. I, II, and IV.
c. I and II.
d. 1, II, III, and IV:
The answer is III and IV. Their payoff has limited rather than unlimited upside potential ;Cat Options show no correlation to the S & P equity index.
Regards,
Rahul
