1a. In your own simple word, explain the difference between path-dependent options and path-independent options and GIVE EXAMPLES of each

1b. Not more than 3 lines, comment on or add to the classmate posting.

Classmate posting:

Path-dependent options are where the path of the underlying asset has an impact on the price of the option. The underlying asset will often fluctuate in price over the life of the option. If the option is path-dependent, these fluctuations can have an impact on the price of the option itself. American options are considered path-dependent because they may be exercised early based on performance of the underlying asset. Another path-dependent option is the lookback option, in which a call would allow you to buy the asset at the lowest price over the life of the option and vice versa for a put (pg. 500 -501).

Path-independent options are where the path of the underlying asset does not have an impact on the price of the option. European options are considered path-independent because they can only be exercised at expiration, making the path followed during the life of the option irrelevant.