1. The exotic option with payoff max[average(St)-K, 0] , where t belongs in time interval [0, T], is an Asian option. Option holder make decision at time T to exercise the option. True or False

2.

A stock price is currently $25. It is known that at the end of two months it will be either $23 or $27. The risk-free interest rate is 10% per annum with continuous compounding. Suppose ST is the stock price at the end of two months. What is the value of a derivative that pays off ST*(ST-S0) at this time?

	A.	14.26
	B.	12.57
	C.	31.21
	D.	28.16