Definition European-Style Option. Description.
A European-Style Option is an option that can be exercised
on its expiration date only.
An option gives its holder the right to purchase or sell a
security during a specific time and price. Option contracts traded on futures
exchanges are mainly American-style, whereas those traded over-the-counter
are mainly European. European options are typically valued using the
Black-Scholes or Black
model formula.
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Financial Economics: Option Value Example
"A share of ARB stock sells for 75% with sd 20% p.a. Risk free rate 9% and stock pays 2 dividends:
1) $2 dividend prior to options expiration date (91days from now) and
2) $2 dividend 182 days from now.
A. Find Black-Scholes value for European-style call option with exercise value of $70.
B. Calculate a 91-day European style put option on ARB stock with same exercise price.
C. How would a change in dividend policy impact the call options value?" |
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European-Style Options Special Interest Group
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Compare with:
American-Style Option
| Asian Option |
Call Option |
Put Option |
Real Options |
Futures Contract
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European-Style Options Sponsor
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Special Interest Group Leader
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