What is American option in FRM Part 1?

An option exercisable at any time up to expiration, unlike a European option exercisable only at expiration. The early-exercise feature cannot reduce value, but it may be worthless for a non-dividend-paying American call.

American option

FRM Part 1 glossary · Valuation And Risk Models

Definition

An option exercisable at any time up to expiration, unlike a European option exercisable only at expiration.

American option in plain English

The early-exercise feature cannot reduce value, but it may be worthless for a non-dividend-paying American call.

Learn these first

Binomial option pricing model
Intrinsic value

Related FRM Part 1 terms

Backtesting
Basis
Basis point
Binomial option pricing model
Black-Scholes-Merton model
Coherent risk measure
Component VaR
Convexity
Delta
Duration (modified)

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