There is the possibility that the options on Merck described in the preceding problem could be exercised
Question:
There is the possibility that the options on Merck described in the preceding problem could be exercised early.
a. Use the pseudo-American call option technique to determine whether this will affect the value of the call.
b. Why does the possibility of early exercise exist? What types of options are most likely to be exercised early?
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Related Book For
Investment Valuation Tools And Techniques For Determining The Value Of Any Asset
ISBN: 9781118011522
3rd Edition
Authors: Aswath Damodaran
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