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Geometric Analysis and Partial Differential Equations Seminar
October 15, 2013 @ 10:30 am - 11:30 pm
Prof. Song-Ping Zhu (University of Wollongong)
American-style Parisian options and their pricing formulae
In this talk, we shall first discuss the pricing of various American-style Parisian options under the Black-Scholes model. After pointing out the fundamental difference between American-style “in” and “out” Parisian options, we present an analytic solution for American-style up-and-in Parisian options, which does not explicitly involve a moving boundary as far as the “mother option” is concerned. The solution is worked out after combining the “moving window” technique developed in Zhu and Chen (2013) and the method of images, in order to simplify the solution procedure. Our final solution is written in the form of three double integrals, which can be easily computed numerically.