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Consider two options that are otherwise identical, expect one is European and the other is American. You use a two-step binomial tree to find the
Consider two options that are otherwise identical, expect one is European and the other is American. You use a two-step binomial tree to find the price of both options. Under what circumstances would you expect that the American option would a) have a higher price than the European option,b) have a lower price than the European option or c) have the same price as the European option? Explain your answer as through you were solving the tree.
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