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1. What does it mean by if no dividends are payable before the option expiry date, American call option will be worth the same as a European call option ??
2. For bilateral and multilateral netting and matching agreements, there are two methods to calculate which are tabular method and diagrammatical method. When we solve the question , is it necessary to know two methods to show the calculation ? can we just show tabular method ? (because diagrammatical method seems complex and tabular method seems to be more simple)
3. When writing answers, can round up to 2 decimal points ?
moreover , in the question 2, is there any chance the question may ask us to present the answer in diagrammatical method ?
1. If there were dividends payable it would affect the value of the sales and therefore of the options. It has nothing to do with whether they are american or european style options.
2. I do not know what you mean by diagrammatical method. However it doesn’t matter how you show it (as long as the marker can follow your workings). You will never ben asked to show it in any specific way.
3. It depends on what it is ups are calculating. For most things you do not lose marks for rounding.
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