Title :
A Smoothed Perturbation Analysis of Parisian Options
Author :
Heidergott, Bernd ; Leahu, Haralambie ; Volk-Makarewicz, Warren M.
Author_Institution :
Dept. of Econ., Vrije Univ., Amsterdam, Netherlands
Abstract :
In this technical note we provide a smoothed perturbation analysis (SPA) estimator of the sensitivity of a discrete time Parisian option with respect to the barrier level. The analysis put forward is of interest in a broader context than that of exotic options as we provide an SPA analysis for a problem where the critical event for the SPA estimator is based on an entire sample path, which is a novelty in the literature. Numerical examples illustrate the performance of the estimator.
Keywords :
perturbation theory; pricing; sensitivity analysis; SPA analysis; SPA estimator; discrete time Parisian option; exotic options; smoothed perturbation analysis; Contracts; Estimation; Monte Carlo methods; Sensitivity; Silicon; Standards; Tin; Option pricing; Parisian option; sensitivity analysis; smoothed perturbation analysis;
Journal_Title :
Automatic Control, IEEE Transactions on
DOI :
10.1109/TAC.2014.2326717
