Which of the Following Is True for American Options

question 7

Multiple Choice

Which of the following is true for American options?

• A)Put-call parity provides an upper and lower bound for the difference between call and put prices
• B)Put call parity provides an upper bound but no lower bound for the difference between call and put prices
• C)Put call parity provides an lower bound but no upper bound for the difference between call and put prices
• D)There are no put-call parity results

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Definitions:

Resource Prices

The cost or price of raw materials, labor, and other inputs required for the production of goods and services.

Mustangs

Wild horses in the Western United States, descended from horses brought to the Americas by Spanish explorers.

Law of Demand

A fundamental economic principle stating that, all else being equal, as the price of a good increases, consumer demand for the good decreases, and vice versa.

Average Price

The mean price of a good or service, calculated by dividing the total revenue by the quantity sold.