Question
In: Finance
- If you do not want to early-exercise the call, you should hold the option until...
- If you do not want to early-exercise the call, you should hold the option until expiration.
True / False
- It can be optimal to early-exercise an American currency call option.
True / False
- It can be optimal to early-exercise an American put option on a non-dividend-paying stock.
True / False
- The price of an American oil put option can never decline with an increase in time to expiration.
True / False
The price of a European call option on a non-dividend-paying stock can never decline with an increase in time to expiration.
True / False
- The price of a European put option on a dividend-paying stock can decline with an increase in time to expiration.
True / False
If it is optimal to exercise a 100-strike call option, it is also optimal to exercise an otherwise identical 110-stike call.
True/False
Solutions
Expert Solution
If you do not want to early-exercise the call, you should hold the option until expiration.
True
- It can be optimal to early-exercise an American currency call option.
False
Early exercising is not an optimal option because if you hold the strike price X till the expiration date by which the holder can save the interest component on the call option.
- It can be optimal to early-exercise an American put option on a non-dividend-paying stock.
True
suppose the stock price reaches zero, then the option holder gains from exercising rather than waiting as they can save the interest on the payout X-S may not yield much
- The price of an American put option can never decline with an increase in time to expiration.
True
it increases with an increase in time of expiration
The price of a European call option on a non-dividend-paying stock can never decline with an increase in time to expiration.
True
- The price of a European put option on a dividend-paying stock can decline with an increase in time to expiration.
True
If it is optimal to exercise a 100-strike call option, it is also optimal to exercise an otherwise identical 110-stike call.
True
jeff jeffy answered 1 year agoRelated Solutions
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