- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 12. American Option Pricing
CFA Practice Question
Which factors ENCOURAGE early exercise of American puts?
A. Dividends
B. Underlying volatility
C. Carrying costs on the underlying
Explanation: Carrying costs discourage exercise for American calls and encourage exercise for American puts.
User Contributed Comments 3
| User | Comment |
|---|---|
| alexchav | For american calls, answer would be dividends. |
| mjbilliard | If the underlying has carrying costs, why would you want to buy the underlying early ( exercise the put) ? |
| danbacarin | ..when you exercise a put you sell the underlying |