An Option That Can Be Exercised Any Time Before Expiration

question 4

Multiple Choice

An option that can be exercised any time before expiration date is called:

• A) an European option
• B) an American option
• C) a call option
• D) a put option

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Definitions:

Income

Receipts garnered on a habitual basis as a result of engaging in work or investment.

Von Neumann-Morgenstern

A theory of expected utility which provides axioms for how rational individuals make decisions under uncertainty.

Utility Function

A mathematical representation of how different bundles of goods or services are valued by an individual or entity for satisfaction or utility.

Expected Utility

A theory in economics that calculates the anticipated utility resulting from different choices, taking into account the likelihood of various outcomes.