Conditional currency options are:
A) options that do not require premiums.
B) options where the premiums are canceled if a trigger level is reached.
C) options that allow the buyer to decide what currency the option will be settled in.
D) none of the above

Question

Quizplus · Accepted Answer

Conditional currency options, also known as knock-in/knock-out (KIKO) options, are options where the premiums are canceled if a predetermined trigger level is reached. If the trigger level is not reached, the option can still be exercised as normal. Therefore, option buyers are able to limit their downside risk by not having to pay premiums if the trigger occurs. Choices A and C are incorrect as they do not accurately describe conditional currency options.

Conditional Currency Options Are