Valuation of the Prepayment Option of a Perpetual Corporate Loan

Figure 3

Prepayment option price 𝑃(𝜆) (solid line) and payoff 𝜒(𝜆) (dashed line) as a function of the intensity 𝜆. Two regions appear: the continuation region 𝜆>Λ^∗ and the exercise region 𝜆≤Λ^∗.