# Tag Info

1

A logical way of answering this question is proof by contradiction. First note that if it is not optimal to exercise an american option prior to expiry, then the option should have the same value as the european option. So assume that it is not optimal to exercise the option prior to expiry, i.e. assume that the american option has the same value as the ...

1

So to expand a bit further on what Brian had mentioned, you're going to get a different vol surface given american vs european. So this is something Brian already pointed out, but one very simple and practical way that you can prove this to yourself is just to think about how the implied forwards are generated. In the European case we use the entire strip ...

3

For a standard American exercise option expiring at $T>0$, price is still monotically increasing in volatility under the Black-Scholes model (though obviously it is not strictly monotonic, due to early exercise rendering price insensitive to volatility in some regions of parameter space). To see this, you can use one of three techniques: Investigate ...

1

With respect to your first question: Yes. The regression has to determine the conditional expectation of the continuation value, i.e., the (discounted) value of the future cash flows including the exercise criteria(s) you have determined for the remaining future exercise times, conditional to the assumption that you did not exercise at or prior the current ...

Top 50 recent answers are included