The Gain from the Early Exercise of an American Put

question 20

True/False

The gain from the early exercise of an American put is X(1 + r)^-T - S₀.

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Definitions:

Certificate Of Deposit

A savings certificate with a fixed maturity date and specified fixed interest rate, issued by a bank to a depositor.

Bank

A financial institution licensed to receive deposits and make loans, offering various other financial services.

Currency Requirement

The necessity for a form of payment to be accepted as valid currency within a financial transaction.

Negotiability

The ability of a financial instrument to be transferred from one party to another with the title passing legally to the transferee.