Just an initial doubt w.r.t. Derivatives Chapter 2 Class 1: Basics
Is this correct to say that the “concept of IVo is applicable only in case of American options, since European options cannot be exercised before maturity there is no IV0”
Needs Clarification.
Both American and European option are a right to buy something. In both European and American we are enjoying this right. Obviously this right is worth something. If IVo didn’t apply what you mean to say is that Eur options will trade at option premium of 0 which is not the case.
So your statement is wrong. You can say that because American options can be exercised anytime, their value can not be less than Eur options (there’s a few cases when value is equal). Hope this clarifies