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Stock options prices are affected by a number of factors and arbitrage arguments are used to...

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Finance

Stock options prices are affected by a number of factors andarbitrage arguments are used to find the fair values of theseoptions.

  1. (1) Explain the three reasons why the early exercise of anAmerican call option on a non-dividend paying stock is neveroptimal.

    (approx. 100 words)

Answer & Explanation Solved by verified expert
4.4 Ratings (832 Votes)
Above all else this just applies to a call option The more broad detailing is that in the event that you have an option to trade A for B and A conveys a higher payout than B you would prefer not to exercise early That applies to the instance of a call option to trade money which pays the interest rate for a nondividend paying stock that pays nothing however not to the situation of a place    See Answer
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Stock options prices are affected by a number of factors andarbitrage arguments are used to find the fair values of theseoptions.(1) Explain the three reasons why the early exercise of anAmerican call option on a non-dividend paying stock is neveroptimal.(approx. 100 words)

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