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来源类型 | Discussion paper |
规范类型 | 论文 |
来源ID | DP11019 |
DP11019 Early Option Exercise: Never Say Never | |
Lasse Heje Pedersen | |
发表日期 | 2015-12-20 |
出版年 | 2015 |
语种 | 英语 |
摘要 | A classic result by Merton (1973) is that, except just before expiration or dividend payments, one should never exercise a call option and never convert a convertible bond. We show theoretically that this result is overturned when investors face frictions. Early option exercise can be optimal when it reduces short-sale costs, transaction costs, or funding costs. We provide consistent empirical evidence, documenting billions of dollars of early exercise for options and convertible bonds using unique data on actual exercise decisions and frictions. Our model can explain as much as 98% of early exercises by market makers and 67% by customers. |
主题 | Financial Economics |
关键词 | Convertible bonds Derivatives pricing frictions Option exercise Short-sale costs Transaction costs |
URL | https://cepr.org/publications/dp11019 |
来源智库 | Centre for Economic Policy Research (United Kingdom) |
资源类型 | 智库出版物 |
条目标识符 | http://119.78.100.153/handle/2XGU8XDN/539848 |
推荐引用方式 GB/T 7714 | Lasse Heje Pedersen. DP11019 Early Option Exercise: Never Say Never. 2015. |
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