Early option exercise: Never say never
Merton的经典结论认为除到期前或分红前外不应提前行权，但本研究证明当存在交易成本、卖空成本或融资成本等摩擦时，提前行权可能最优，并用实际数据解释了大部分提前行权行为。
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.