Describe the Conditions When It Would Be Optimal to Exercise

question 48

Essay

Describe the conditions when it would be optimal to exercise an American call and an American put option prior to their expiration.

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Definitions:

Self-Serving Decisions

Choices made with the primary aim of benefiting oneself, often at the expense of others or ethical considerations.

Others' Rights

The acknowledgment and respect for the rights and freedoms of other individuals, essential for maintaining ethical and harmonious interactions.

Temporal Immediacy

The degree to which future benefits or consequences are perceived as being imminent or occurring in the near term.

Social Proximity

Refers to the closeness or distance between individuals in social relationships or networks.