previous up next SYLLABUS  Previous: 6.2.2 Solution of the  Up: 6 AMERICAN OPTION PAYOFF  Next: 6.4 Exercises


6.3 Computer quiz

  1. Comparing American and European exercise styles
    1. American options are always more expensive
    2. American options are always less expensive
    3. American put options are more expensive and call options are cheaper

  2. American options are known to have
    1. no intrinsic value
    2. a larger intrinsic value than their European counterparts
    3. no time value
    4. a larger time value than their European counterparts

  3. The price of an American call in-the-money is always
    1. smaller than the European call if both have no dividend and a positive spot rate
    2. equal to the European call if both have no dividend and a positive spot rate
    3. larger than the European call if both have no dividend and a positive spot rate
    4. equal to the European call if both have a positive dividend and zero spot rate

  4. An approximation $ V_\textrm{AMR}(S,t)\approx\max(V_\textrm{EUR}(S,t),\Lambda(S))$ based on a European contract
    1. always underestimates the fair price of the American contract
    2. always overestimates the fair price of the American contract
    3. cannot say

  5. American and European options require (BC=boundary, TC=terminal conditions) $ ^\spadesuit$
    1. same BC, same TC
    2. same BC, different TC
    3. different BC, same TC
    4. different BC, different TC

SYLLABUS  Previous: 6.2.2 Solution of the  Up: 6 AMERICAN OPTION PAYOFF  Next: 6.4 Exercises