Please help me respond to the following questions while elaborating on your insight and providing external support ideas:
Holding all else constant, if dividends increase, does the difference between American calls and puts increase or decrease? Why? What about the difference between European calls and puts?
Explain in a heuristic manner why option replication on a binomial tree is a “dynamic” strategy. Expand your thoughts by providing external support that helps to provide further insight into the use of binomial trees.