Dassios, Angelos 
ORCID: 0000-0002-3968-2366 and Zhang, You You
(2016)
The joint distribution of Parisian and hitting times of the Brownian motion with application to Parisian option pricing.
Finance and Stochastics, 20.
pp. 773-804.
ISSN 0949-2984
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Abstract
We study the joint law of Parisian time and hitting time of a drifted Brownian motion by using a three-state semi-Markov model, obtained through perturbation. We obtain a martingale, to which we can apply the optional sampling theorem and derive the double Laplace transform. This general result is applied to address problems in option pricing. We introduce a new option related to Parisian options, being triggered when the age of an excursion exceeds a certain time or/and a barrier is hit. We obtain an explicit expression for the Laplace transform of its fair price.
| Item Type: | Article |
|---|---|
| Official URL: | http://link.springer.com/journal/780 |
| Additional Information: | © 2016 Springer-Verlag Berlin Heidelberg |
| Divisions: | Statistics |
| Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing |
| Date Deposited: | 13 Jan 2016 14:30 |
| Last Modified: | 24 Oct 2024 07:27 |
| URI: | http://eprints.lse.ac.uk/id/eprint/64959 |
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