Real Options and American Derivatives: The Double Continuation Region
研究了资本投资期权和黄金贷款等抵押借款合同中的非标准最优行权策略，发现当期权处于深度价内时也会推迟行权，并刻画了双重自由边界的性质。
We study the nonstandard optimal exercise policy associated with relevant capital investment options and with the prepayment option of widespread collateralized-borrowing contracts like the gold loan. Option exercise is optimally postponed not only when moneyness is insufficient, but also when it is excessive. We extend the classical optimal exercise properties for American options. Early exercise of an American call with a negative underlying payout rate can occur if the option is moderately in the money. We fully characterize the existence, the monotonicity, the continuity, the limits, and the asymptotic behavior at maturity of the double free boundary that separates the exercise region from the double continuation region. We find that the finite-maturity nonstandard policy conspicuously differs from the infinite-maturity one. This paper was accepted by Jerome Detemple, finance.