Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Why is an American option with a longer time to expiration generally worth more than an otherwise identical option with a shorter time to expiration?

Why is an American option with a longer time to expiration generally worth more than an otherwise identical option with a shorter time to expiration?

(Select the best choice below.)

A.

The stock of the American option with the longer time to expiration will increase more.

B.

The American option with the longer time to expiration has all the same rights and privileges as the option with the shorter time to expiration, plus additional rights and privileges.

C.

The American option with the longer time to expiration has fewer rights and privileges than does the option with the shorter time to expiration.

D.

The American option with the longer time to expiration has all the same rights and privileges as the option with the shorter time to expiration, plus it must be exercised on the expiration date.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Pricing And Liquidity Of Complex And Structured Derivatives

Authors: Mathias Schmidt

1st Edition

3319459694, 978-3319459691

More Books

Students also viewed these Finance questions

Question

Distinguish between recruitment sources and recruitment methods.

Answered: 1 week ago

Question

How has social media emerged as an important force in recruiting?

Answered: 1 week ago

Question

5.5 Summarize external recruitment methods.

Answered: 1 week ago