Dassios, Angelos 
ORCID: 0000-0002-3968-2366 and Lim, Jia Wei
(2013)
Parisian option pricing: a recursive solution for the density of the Parisian stopping time.
SIAM Journal on Financial Mathematics, 4 (1).
pp. 599-615.
ISSN 1945-497X
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Abstract
In this paper, we obtain the density function of the single barrier one-sided Parisian stopping time. The problem reduces to that of solving a Volterra integral equation of the first kind, where a recursive solution is consequently obtained. The advantage of this new method as compared to that in previous literature is that the recursions are easy to program as the resulting formula involves only a finite sum and does not require a numerical inversion of the Laplace transform. For long window periods, an explicit formula for the density of the stopping time can be obtained. For shorter window lengths, we derive a recursive equation from which numerical results are computed. From these results, we compute the prices of one-sided Parisian options.
| Item Type: | Article |
|---|---|
| Official URL: | http://epubs.siam.org/loi/sjfmbj |
| Additional Information: | © 2013, Society for Industrial and Applied Mathematics |
| Divisions: | Statistics |
| Subjects: | H Social Sciences > HA Statistics Q Science > QA Mathematics |
| Date Deposited: | 14 Aug 2014 09:16 |
| Last Modified: | 07 Nov 2024 00:10 |
| URI: | http://eprints.lse.ac.uk/id/eprint/58985 |
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