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David, I think I've found a sound argument for C=c Proposition: An American call option on an asset without dividends should never be exercised early—but perhaps sold. It therefore has the same price as a European call option. Suppose that you are pretty sure that price of the...

David, I cannot agree more with you. I would try to investigate why Hull and others state that C=c just for intellectual curiosity. I'll keep reading around and post back when/ if i find something convincing! best regards,

Right now, I don't have the CFA books with me. I guess you are referring to the one written by Chance. I will take a look at the book next Monday. Of course, I agree with “It is never optimal to exercise an American call on nondividend-paying stock before the expiration date” (under the...

I keep making the same mistake The value of a fiduciary American call is (S - K) + Ke^(-rT) when the call is in-the-money and it is exercised early K and Ke^(-rT) will not cancel out. Therefore, a fiduciary American call should be equal to than a FIDUCIARY European Call because it does not...

Hi David, I see your point that C + K is not a fiduciary call because the amount you will receive at expiration with the bond (strike price) is not discounted but still C + K ≥ P + S. Sorry to keep bothering you, but would you please check the following: The value of a fiduciary...

Sorry my previous question contained an error. I mean fiduciary call and not covered call. Is it always a fiduciary call (either with an american or european call) greater or equal than a protective put (constructed with an american put) ? Fiduciary call ≥ American Protective put C...

Hi David, The inequality for american options is (I use "X" for the strike price): S - X ≤ C - P ≤ S - Xe^(-rT) My question is: Is it always a covered call (either with an american or european call) greater or equal than a protective put (constructed with an american put)...

Hi David, I just want to thank you for your help through the forum. Plenty has been said about your awesome screencasts but your forum is extremely helpful. It is not only that your answers are fast but also the quality of your explanations is superb. I know that it takes time to understand...

David, Thanks so much for your concise explanation. Your help is priceless! Bionic Turtle is a great buy. For convenience to other users, I’ve summarized some important conclusions on this topic: PRICING OF ED FUTURES CONTRACTS I've realized that it is important to remember the...

David, I think that I finally understand the convexity bias (my previous question #4). 4) futures PRICES < forwards PRICES (pg. 19). So the implied RATE on the futures contract will be greater than the implied RATE on the FRA. Is this correct?

Hi David, Regarding the relationship between forward & futures prices (pg. 19) which is also addressed in Treasury bonds Futures & Eurodollar Futures (page 26), I would appreciate it if you could please clarify the following: 1) Both Eurdollar futures and T-bills are quoted in price (as...

Sorry, I didn't notice that it was already posted. br,

Hi David, I think there is a typo on page 25 (last paragraph): Normal backwardation is when the when the futures price exceeds the expected future spot price. From the top of the page, I understand that normal backwardation is when the futures price IS LESS THAN the expected future...

Thank you very much, David.

Hi David, I don't see the relationship between time to maturity and futures prices (page 24) If the futures price is an increasing function of time to maturity, the short should deliver as early as possible. (And for modeling purposes, here we assume delivery at beginning of period.)...

Hi David, On page 22, there is an example of the value of a forward contract. I believe that there might be a mistake. If you want to use the first formula, the forward price seems correctly calculated (F= 10.126). However, in the second part of the exercise, e should be power to the...

Hi David, On page 20, the notes state that "if a non-dividend paying stock offered a convenience yield, then the forward price calculation is: F=Se^(r-y)T OK But then you say "except that a non dividend paying stock does not offered a convenience yield," so F=Se^(rT). I don't have a...

Hi David, Regarding the Coherence Properties of Risk Measures (page 112), I would like you to double check the following properties: (i) Monotonicity: If expected value of Y is greater than X, then risk of Y is LESS than X. Is it "LESS than" or "GREATER than"? (ii) Translation Invariance: For...