American Parisian options

Using the solution of the one-sided exit problem, a procedure to price Parisian barrier options in a jump-diffusion model with two-sided exponential jumps is developed. By extending a method developed in Chesney, Jeanbanc and Yor (1997) for the diffusion case to this more general setup, we arrive at a numerical pricing algorithm that significantly outperforms Monte Carlo simulation for the prices of such products.

• Type: Journal
• Year: 2006
• Where: FS
• Authors: Marc Chesney, Laurent Gauthier
• Keywords: FS 2006, One-sided Exit Problem, Parisian Barrier Options, Two-sided Exponential Jumps