In the options markets,an American call option should have a higher premium than the comparable European call option because:

Question

Quizplus · Accepted Answer

An American call option should have a higher premium than the comparable European call option because it gives more flexibility to the holder. The holder of an American call option has the right to exercise the option at any time before expiration, whereas the holder of a European call option can only exercise the option at expiration. As a result, the American call option is more valuable to the holder, and therefore should have a higher premium.

In the Options Markets,an American Call Option Should Have a Higher