Critically explain why the arguments leading to put-call parity for European options cannot be used to give a similar result for American options.
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Critically explain why the arguments leading to put-call parity for European options cannot be used to give a similar result for American options.
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- How are American options different from the European options? Which one of them is likely to have a higher value and why?What determines any difference between the prices of otherwise identicalAmerican and European style call options? Do the same factors affectdifferences between American and European put options? Explain youranswerCritically evaluate the argument that fixed exchange rate regime is better than flexible exchange rate regime.
- The dominant organized options exchange is what?Does arbitrage destabilize foreign exchange markets? If yes, which argument do yousupport? offer your own opinion on this issue.This is an open ended question and you need to do some research to get the answers: Is arbitrage good or bad? Justify. What are some problems with the Black-Scholes-Merton model? Suggest some improvements of the Black-Scholes-Merton model. In the class, we have derived the Black-Scholes-Merton formula for European options. Is is possible to derive something similar for American options?
- What are the main disadvantages of CAPM model against the advantages of Fama and French three factor model? Why Fama and French model could be more preferable?Which of the following(s) is (are) proposed as a reason to contribute to a non-participation puzzle? I. Downside risk II. Exchange rate risk II. Participation costs IV. Political activism O , II, and II O Il and II O Il and IV O , II, and IV O I, II, II, and IVFinance Use the put-call parity to derive the relationship between the theta of a European call option and the theta of a European put option. Show that the relationship holds if you substitute the formulas for theta of call and theta of put in the Black-Scholes model.
- Complete the following sentence: "The put-call parity relationship between American options..." O I. is given by the following expression: St - K s Ct - Pt s St - K exp(-Ro (T-t)) O II. cannot be derived because these options can be exercised before the expiration date. O II. yields a larger value of the call option than for the European option counterparts. O IV. None of the above.what is the lower/upper bounds for prices of american call/put options with divdend? is it different with european?Describe the incremental Analysis for Comparing Mutually Exclusive Alternatives?