Giaccotto et al. [2007. Journal of Finance 62, 411-445] provide a simple model for pricing the cancellation and the purchase options typically embedded in automobile lease contracts, assuming constant interest rates. They show that the cancellation option is worthless because of a penalty...

In a recent article, Giaccotto, Goldberg, and Hedge (2007) provide a simple model for pricing the cancellation and the purchase options typically embedded in automobile lease contracts, assuming constant interest rates. They show that the cancellation option is worthless because of a penalty...