What does that have to do with the price of tea in China? There is no incentive to exercise a <b>CALL</b> option prior to expiration, unless it is to capture a dividend. Okay there is one other good reason. To stay under position limit. That's useful for the arb who was able to buy 100,000 calls below parity (obviously an everyday occurrence) and sell 10 million shares short. But for a the rest of us, there is no reason to give up a free put. NONE. Mark
Nice work plagiarizing Alan Lewis. If you are going to steal Alan's posts, at least provide attribution. Quoting in context would be useful also. I am assuming someone as stupid as you are could not actually be Alan. You are smarter than your younger brother RiskFree, but you are still a fool in way over your head. You can read every post on Wankmot twice, and memorize everything Collector ever wrote, but XFlat forgets more in a week than you will ever know about options trading.
You need to understand something. A parity is composed by a call, you're right, and....a put. So yes there is no interest to exercise an american call, but an american put. If the put is exercised, then there is no more parity. An another way to see that, is to consider c european call, C american call, p european put and P american put. If there is no dividend, C=c, but P>p So, C-P can't be the same as c-p. But, yes I agree. It has nothing to do with the price of tea in China.
I didn't mention Alan, who is a perfect unknown individual for everybody here. What is important is not what Alan quotes, it is what Merton wrote. But you seem to be a well regular visitor of "wank'sites". You got problem with your hands ?
Something is wrong/missing. By the same argument attributed to Merton for P>p an analogous argument can be made for C>c.
Try this : Vol=30%, r=5%, spot=100, strike=100 dividend=0, maturity=365 days American call = 14.231 American put= 9.861 European call=14.231 European put=9.354 Hence one can't have at the same time American call-american put=european call-european put= call/ put parity
I was just stating that the quoted proof or argument seems faulty. I think it is very hard to price anything when the market is not open. Not all models agree with the values you have supplied. Mostly I do not understand your particular definition of parity. C + Ke^(-rT) <= P + S <= C + K seems to be an adequate parity relationship for a dividendless issue with american style options.