Black-scholes are based on european options

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Reference no: EM131931306

1. Options traded in the market are American options, but option pricing models such as the Black-Scholes are based on European options. Why is this possible? What are the exceptions to the rule?

2. The economic news indicates the economy is currently is starting to expand. What affect should this have on the spread between AAA and B rated bonds? Why? Illustrate your answer.

Reference no: EM131931306

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