AuthorTopic: Payoff from Call option (American option)
ckylwy
@2009-03-26 08:32:52		 When calculating the payoff of an american option

= Share price - Exercise price / (1-REF)T

But I do not understand why we need to discount the exercise price because it can be exercised immediately(now).

It is different from the payoff from call option (European) which can be exercised only on the expire date(future), so it is reasonable to discount the future exercise price.

Thank you very much

Steven

CFA Discussion Topic: Payoff from Call option (American option)

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