Before revision:  Using the principles of smooth and continuous fit , we determine the buyer's and seller's equilibrium exercise strategies , which are of threshold type . Numerical examples are provided to illustrate the impacts of default risk and  contractual features on the fair premium and exercise strategies .
After revision:  Using the principles of smooth and continuous fit , we determine the buyer's and seller's equilibrium exercise strategies for the buyer and the seller. We then rigorously prove the existence of the Nash equilibrium and compute the contract value at equilibrium . Numerical examples are provided to illustrate the impacts of default risk and contractual features on the fair premium and exercise strategies .