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Type | Working Paper |
Scope | Discipline-based scholarship |
Title | Québécoisation method for the pricing of Parisian options with jump risk |
Organization Unit | |
Authors |
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Language |
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Institution | University of Zurich |
Number | - |
Date | 2016 |
Abstract Text | In this paper, a new technique for pricing of European and American Parisian options, that we call the québécoisation method, is developed. We study the pricing of Parisian options in a hyper-exponential jump-diffusion model using the double Laplace-Carson transform with respect to the time to maturity and the residual Parisian time (time to expiration of the Parisian window) of the system of two partial integro-differential equations describing the option price dynamics. The transformed, i.e., québécoised, option price and hedging parameters delta and gamma are computed in a closed form, and the final results are obtained via the two-dimensional Gaver-Stehfest inversion algorithm. Our pricing method is analytically tractable, and it provides important economic insights for pricing and hedging of European and American Parisian options in the presence of jumps. |
Other Identification Number | merlin-id:13148 |
PDF File | Download from ZORA |
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