Dassios, Angelos and Wu, Shanle
Brownian excursions in a corridor and related Parisian options.
Department of Statistics, London School of Economics and Political Science, London, UK.
In this paper, we study the excursion time of a Brownian motion with drift inside a corridor by using a four states semi-Markov model. In mathematical finance these results have an important application in the valuation of options whose prices depend on the time their underlying assets prices spend between two different values. In this paper, we introduce the Parisian corridor option and obtain an explicit expression for the Laplace transform of its price formula.
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