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Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps

Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps Abstract Using the solution of one-sided exit problem, a procedure to price Parisian barrier options in a jump-diffusion model with two-sided exponential jumps is developed. By extending the method developed in Chesney, Jeanblanc-Picqué and Yor (1997; Brownian excursions and Parisian barrier options, Advances in Applied Probability, 29(1), pp. 165–184) for the diffusion case to the more general set-up, we arrive at a numerical pricing algorithm that significantly outperforms Monte Carlo simulation for the prices of such products. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematical Finance Taylor & Francis

Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps

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Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps

Abstract

Abstract Using the solution of one-sided exit problem, a procedure to price Parisian barrier options in a jump-diffusion model with two-sided exponential jumps is developed. By extending the method developed in Chesney, Jeanblanc-Picqué and Yor (1997; Brownian excursions and Parisian barrier options, Advances in Applied Probability, 29(1), pp. 165–184) for the diffusion case to the more general set-up, we arrive at a numerical pricing algorithm that significantly outperforms...
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Publisher
Taylor & Francis
Copyright
Copyright Taylor & Francis Group, LLC
ISSN
1466-4313
eISSN
1350-486X
DOI
10.1080/1350486X.2011.599976
Publisher site
See Article on Publisher Site

Abstract

Abstract Using the solution of one-sided exit problem, a procedure to price Parisian barrier options in a jump-diffusion model with two-sided exponential jumps is developed. By extending the method developed in Chesney, Jeanblanc-Picqué and Yor (1997; Brownian excursions and Parisian barrier options, Advances in Applied Probability, 29(1), pp. 165–184) for the diffusion case to the more general set-up, we arrive at a numerical pricing algorithm that significantly outperforms Monte Carlo simulation for the prices of such products.

Journal

Applied Mathematical Finance – Taylor & Francis

Published: Apr 1, 2012

Keywords: Parisian options; Laplace transform; double-exponential model; one-sided exit problem; jump-diffusion model

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