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Old 04-20-2005, 05:41 PM
crazy canuck crazy canuck is offline
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Join Date: Sep 2002
Location: Toronto canada
Posts: 657
Default Re: newbie question about options


it is never optimal to exercise the American call option early.


Yes it is.

I'm sure there is a simpler explanation, but this will do:

American option pricing


[ QUOTE ]
To do their approximation, BAW decomposes the American price into the European price and the early exercise premium

[/ QUOTE ]

If it would be never optimal to exercise the option early the early exercise premium would be zero.
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