06003. American vs European calls
difficulty ·answer type: proof·✓Not solved
Problem
Since American options can be exercised any time before maturity, they are often more valuable than European options with the same characteristics. But when the stock pays no dividend, the theoretical price for an American call and European call should be the same since it is never optimal to exercise the American call before maturity. Why should you never exercise an American call on a non-dividend paying stock before maturity?
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