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A combinatorial approach for pricing Parisian options

Decisions in Economics and Finance, ISSN: 1129-6569, Vol: 25, Issue: 2, Page: 111-125
2002
  • 22
    Citations
  • 0
    Usage
  • 24
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    22
    • Citation Indexes
      22
      • CrossRef
        19
      • Academic Citation Index (ACI) - airiti
        1
  • Captures
    24

Article Description

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. © Springer-Verlag 2002.

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