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American Capped Call Option


A capped call which has the features of an American option (American-style option). More specifically, it is a call option that gets automatically exercised if and when the underlying asset breaks through a certain maximum level (i.e., beyond the cap price) anytime during the lifetime of the contract (American exercise). This option is subject to a preset profit cap to the advantage of the option writer. That is, it helps the writer limit his losses (in case the underlying price keeps increasing) up to a specific level.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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