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Give intuitive explanations of theorem

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Can you give intuitive explanations of Theorem 2, i.e., it is never optimal to early/premature exercise an American call option on a non-dividend-paying stock?

Hints: Please consider three aspects in your explanation. (1) The insurance value that the American call (on a non-dividend-paying stock) provides and (2) time value of money of the payout of strike price K when exercising the option, and (3) the stock does not pay dividend.

Reference no: EM133121266

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