Which of the Following Describes How American Options Can Be

question 10

Multiple Choice

Which of the following describes how American options can be valued using a binomial tree?

• A) Check whether early exercise is optimal at all nodes where the option is in-the-money
• B) Check whether early exercise is optimal at the final nodes
• C) Check whether early exercise is optimal at the penultimate nodes and the final nodes
• D) None of the above

---

Definitions:

Dependent Variable

A variable whose value is influenced or determined by one or more independent variables in an experiment or analysis.

Independent Variable

A variable in an experiment or model that is manipulated or changed to observe its effects on the dependent variable.

Procter & Gamble

An American multinational consumer goods corporation specializing in a wide range of personal health/consumer health, and hygiene products.

Old Spice

A brand of male grooming products known for its distinctive fragrance and creative advertising campaigns.