A note on the never-early-exercise region of American power exchange options

This note discusses how the never-early-exercise region of American power exchange options is influenced by the nonlinearity from its power coefficients. We consider a class of models which satisfy the power invariant property and show that early exercise depends crucially on the quantities termed effective dividend yields. Our mathematical analysis extends an existing model-free result and indicates how early exercise should depend on parameters. A numerical analysis is conducted to complement the analytical results and provide further observations.