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Derivatives, Am I right?

Is it correct?


  • no cash flows: Pa=Pe
  • cash flows: Pa>Pe


  • no cash flows:Pa>Pe
  • cash flows:Pa>Pe

Pa-price of american option Pe- price of european o

"Using Wiley for my CFA journey was by far the best option… I was able to pass on my first attempt.”– Moe E., Canada

Are you asking about lower bounds? Just remember that European option can not be exercised early whilst American can

for Calls Amercian and European C = max(0; S-X/(1+Rf)n) A>=E American is worth al leat as European calls

 for Puts European can not be excercise early P= (max0.X/(1+Rf)n)

american P=max(0. X-S) A>E  due to immediate execution  value is a bit different