Task: Class Definition Understanding (ontology: Business_Finance/Financial_Industry_Business_Ontology)

Which of the following definitions best describes 'compound option'?

A. exotic option that is fully specified with respect to a set expiry date, underlying asset and other parameters, purchased and paid for on initiation, but that becomes active at a set activation date with a strike price determined at the time of activation
B. exotic option for which the underlying asset is another option
C. option whose final exercise depends upon the path taken by the price of an underlying instrument, i.e., whose payoff depends on whether or not the underlying asset has reached or exceeded a predetermined price
D. exotic option that minimizes the uncertainties related to the timing of market entry, providing the holder the advantage of knowing history when determining when to exercise their option

Answer: exotic option for which the underlying asset is another option