Investor Glossary-european-style optionInvestor Glossary-european-style optionInvestor Glossary-european-style optionInvestor Glossary-european-style optionInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

European-style Option

The HTML to link to this page
 

A European-style option is an option that may be exercised only at expiration, or maturity. The European-style option is less difficult to price than otherwise identical American-style option because the later, unlike the European-style option, can be exercised before maturity. Consequently, the corresponding American option may have no analytic formula even when one exists for the European-style option. This exercise flexibility, however, has made the European-style option less popular, despite the fact that American-style options are not always exercised prior to maturity. An example of a European-style option with an analytic solution that does not exist for the American-style option is the loopback option. The payoff to a loopback option depends on the maximum or minimum price reached by the underlying asset during the period until expiration. A European-style option can be traded on an American exchange, and vice versa. The first European-style option contracts had publicly traded stocks as the underlying asset.



Rate this European-style option definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: quality assurance, minority interest, command economy, Zero Cost Collar, APR, annual return, Key Rate Duration, average price per share, ex-dividend date, phantom income, risk management, in escrow, EBITDA, diluted share, option premium, cancelled check, covered put, required rate of return, labor relations, VIX, balance sheet, current ratio, LIBOR, real GDP, 401a, debt service coverage, 1031 exchange, margin rate, 144a, liquidity ratio, class C shares, wholly-owned subsidiary, deferred tax, irrevocable trust, 1035 exchange, stock market close, deferred revenue, implied volatility, reverse mortgage, retained earnings, dividends payable, inflation, stock split, open position, limit order, ex-dividend, FICO score, FTSE, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use