The most valid relationship between the values of European calls ( $C _ { E }$ ), American calls ( $C _ { A }$ ), shout call options ( $C _ { S }$ ), and lookback calls ( $C _ { L }$ ) is as follows:
A) $C _ { A } \leq C _ { S } \leq C _ { L }$
B) $C _ { E } \leq C _ { L } \leq C _ { S }$
C) $C _ { S } \leq C _ { E } \leq C _ { A }$
D) $C _ { A } \leq C _ { L } \leq C _ { S }$

Question

Quizplus · Accepted Answer

American call options can be exercised at any time before expiration, making them potentially more valuable than European calls, which can only be exercised at expiration. Shout options, allowing the holder to "shout" for the optimal exercise price before expiration, add value beyond standard American options. Lookback options, which let the holder exercise at the most favorable price of the underlying asset during the option's life, provide even more potential value, making them typically the most expensive. Thus, $C _ { A } \leq C _ { S } \leq C _ { L }$ correctly orders these options by their potential value.

The Most Valid Relationship Between the Values of European Calls CEC _ { E }CE​

The Most Valid Relationship Between the Values of European Calls $C _ { E }$