1. Under what conditions can a European option be worth as much as the equivalent American option? 2

1. Under what conditions can a European option be worth as much as the equivalent American option? 2. Compare the direct value of exercising an American put that is in-themoney (you get K − S0) to the value of the put in the put-call parity formula P0(K) = C0(K) + [PV0(K) − S0 ] . Under what conditions is it better not to exercise the American put?

 

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