In option valuation theory all of the following are true except:
A) The "underlying asset" refers to what is obtained upon the exercise of a "call option" or what is given up on the exercise of a "put option").
B) The "exercise price" is the value of what must be paid by the option holder when the option is exercised.
C) A "European option" can be exercised anytime prior to its expiration date, while an "American option" can only be exercised at the time of its expiration.
D) A "compound option" is an option on an option.

Question

Quizplus · Accepted Answer

A "European option" can only be exercised at the time of its expiration, while an "American option" can be exercised anytime prior to its expiration date. This is the opposite of what was stated in option C.

In Option Valuation Theory All of the Following Are True