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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Parisian Options with Jumps: A Maturity-Excursion Randomization Approach
Organization Unit
Authors
  • Marc Chesney
  • Nikola Vasiljevic
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Quantitative Finance
Publisher Taylor & Francis
Geographical Reach international
ISSN 1469-7688
Volume 18
Number 11
Page Range 1887 - 1908
Date 2018
Abstract Text This paper introduces an analytically tractable method for the pricing of European and American Parisian options in a flexible jump-diffusion model. Our contribution is threefold. First, using a double Laplace-Carson transform with respect to the option maturity and the Parisian (excursion) time, we obtain closed-form solutions for different types of Parisian contracts. Our approach allows us also to analytically disentangle contributions of the jump and diffusion components for Parisian options in the excursion region. Second, we provide numerical examples and quantify the impact of jumps on the option price and the greeks. Finally, we study the non-monotonic effects of volatility and jump intensity close to the excursion barrier, which are important for shareholders’ investment policy decisions in a levered firm.
Related URLs
Digital Object Identifier 10.1080/14697688.2018.1444785
Other Identification Number merlin-id:16227
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