- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 3. Pricing and Valuation of Forward Contracts
CFA Practice Question
Which type of call options on dividend-paying stock are worth more?
A. American-style call options
B. European-style call options
C. They are worth the same.
Explanation: The holder of a call option in the money on a dividend-paying stock may decide to exercise the option early to receive the dividend amount. The right to exercise early has value.
User Contributed Comments 2
| User | Comment |
|---|---|
| madjoffm | For sure, the american call would be more worth due to the inherent options of exercizing daily. |
| ibrahim18 | wrong @madjoffm. You only excercise european options at expiration, but you can exercise american options early. |