A combinatorial approach for pricing Parisian options |
| |
Authors: | Massimo Costabile |
| |
Institution: | 1.Dipartimento di Organizzazione Aziendale e Amministrazione Pubblica, Università della Calabria?e-mail: massimo.costabile@unical.it,IT |
| |
Abstract: | This paper provides a discrete time algorithm, in the framework of the Cox–Ross–Rubinstein analysis (1979), to evaluate both
Parisian options with a flat barrier and Parisian options with an exponential boundary. The algorithm is based on a combinatorial
tool for counting the number of paths of a particle performing a random walk, that remains beyond a barrier constantly for
a period strictly smaller than a pre-specified time interval. As a result, a binomial evaluation model is derived that is
very easy to implement and that produces highly accurate prices.
Received: 19 March 2001 / Accepted: 17 March 2002
The author thanks Prof. Ivar Massabó for helpful comments and discussions. This research has been partially supported by
MIUR (research on “Modelli per la Finanza Matematica”) |
| |
Keywords: | Mathematics Subject Classification (2000): 05A10 91B28 |
本文献已被 SpringerLink 等数据库收录! |
|