Question on Deltas Using Binomial Pricing Models

Discussion in 'Options' started by cohenmichaela, Nov 28, 2005.

  1. Does anyone know why the deltas of an American call and a put calculated using a binomial pricing model would be greater than 1?

    I think I've seen this somewhere before but have forgotten the exact reasoning for it.

    Thanks,

    -Mike
     
  2. Never mind. I think I've found the answer. It has to do with the "early exercise premium" associated with american style puts and also american calls with dividends.
     
  3. you got it....