Pricing Options with Extendible Maturities: Analysis and Applications
推导了期权持有者或发行者可延长到期期限的期权定价公式，并应用于美式期权、垃圾债券和共享权益抵押贷款估值，还分析了债权人延长违约债务期限的激励及其对股东投资决策的影响。
Many common types of financial contracts incorporate options with extendible maturities. This paper derives closed-form expressions for options that can be extended by the optionholder and presents a number of applications including the valuation of American options with stochastic dividends, junk bonds, and shared-equity mortgages. We also derive closed-form expressions for writer-extendible options and discuss the writer's economic incentives for extending an out-of-the-money option. We apply these results to show that corporate debtholders have a strong incentive to extend the maturity of defaulting debt if there are liquidation costs. We model and solve the debtholders' optimal extension problem and show that the possibility of an extension can induce shareholders in highly levered firms to accept negative NPV projects.