- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 2. Forward Commitment and Contingent Claim Features and Instruments
- Subject 2. Contingent Claims: Options
CFA Practice Question
Which of the following statements about European and American options is (are) true?
II. In actual markets, most options are European options.
III. American options are easier to analyze.
I. An American option permits the owner to exercise at any time before or at expiration. A European option permits the owner to exercise only at expiration.
II. In actual markets, most options are European options.
III. American options are easier to analyze.
Correct Answer: I only
User Contributed Comments 7
| User | Comment |
|---|---|
| gth763s | What is wrong with II? |
| RichWang | On the OTC market, most (all) are European options. However, on the exchange traded, most are American option. |
| surob | what is wrong with III? |
| arkot90 | european options are easier to analyze because you know the exercise date (the expiration date) |
| dnoyelles | most options are american. |
| group | American options are difficult to analyze since it can be exercised any time before expiration whereas European options can only be exercised at expiration, this feature makes it easier to analyze as compared with American Options |
| johntan1979 | What is wrong with gth763s and surob? Didn't they read the notes? |