Why monte carlo simulation approach cannot easily be used

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1. Explain why the Monte Carlo simulation approach cannot easily be used for Americanstyle derivatives.

2. A 9-month American put option on a non-dividend-paying stock has a strike price of $49. The stock price is $50, the risk-free rate is 5% per annum, and the volatility is 30% per annum. Use a three-step binomial tree to calculate the option price.

Reference no: EM131239454

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