A new procedure for pricing parisian options

in Journal of Derivatives, 12 (4)

ISSN : 1074-1240

par Bernard, Carole ; Le Courtois, Olivier (1975-....) ; Quittard-Pinon, François (1945-....)

2005 - 45-54 P. | En anglais

Parisians options extend barrier options in that their covenant depends on the time the underlying spends beyond a given threshold. By their nature, they are hard to price and hedge, although some quite involved methods are available. Parisians options can be valued by four different methods : Monte Carlo simulations, lattices, partial differential equations, and inverse Laplace transforms. We develop a new inverse Laplace transform method that is quick and appropriate to the problem. Our method can also be used to treat other financial problems that require inversion of a Laplace transform.

Voir la revue «The Journal of Derivatives»

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