Examlex
Under what two conditions might an American option be worth more than an
otherwise identical European option? Explain.
Risk Premium
The extra return expected by an investor for holding a risky asset compared to a risk-free asset, as compensation for the higher risk.
Diversifiable Risk
A type of risk that can be reduced or eliminated from a portfolio by holding a variety of investments.
Market Risk
The risk of losses in investments due to market conditions such as changes in interest rates, currency exchange rates, and stock prices.
Well-Diversified Portfolio
An investment portfolio that includes a mix of assets (stocks, bonds, etc.) to minimize risk and volatility.
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