Early Exercise of American Options: Call Equivalence and the Put Premium
Why This Matters One of the first results I learned in my derivatives pricing course is that an American call on a non-dividend-paying stock is worth the same as its European counterpart, while an American put can be worth more. The result is easy to remember, but what actually produces the asymmetry did not register with me at the time, and that is what I wanted to pin down in this article. ...