This paper analyzes the effect of counterparty credit risk on optimal early exercise policy and value of American options. In contrast with the existing literature we find that the price of the underlying asset at which it is optimal to exercise an American option can be significantly different...

Credit default swaps (CDSs) and deep out-of-the-money put (DOOMP) options can both be used as a credit protection instrument. However, partial market segmentation results in deviations between firm hazard rates implied by these contracts. These deviations are driven by a systematic...