G2TT
来源类型Discussion paper
规范类型论文
来源IDDP11019
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
URLhttps://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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