An often-cited rule in corporate finance is that a firm should call a bond as soon as the bond's market price equals its call price. But, in fact, many callable bonds sell for more than their call prices. One explanation is that the implicit assumption that calls are executed so as to leave...

"Hedge funds often impose lockups and notice periods to limit the ability of investors to withdraw capital. We model the investor's decision to withdraw capital as a real option and treat lockups and notice periods as exercise restrictions. Our methodology incorporates time-varying probabilities...