Why Are American Options Generally More Difficult to Price than European Options?

American options are harder to price because of the early exercise feature. The optimal time to exercise an American option is a complex, path-dependent problem.

European options, having only one exercise date, can be priced using simpler models like the Black-Scholes formula. American options often require more complex numerical methods, such as binomial or trinomial trees, to account for the optimal early exercise decision.