A smoothed perturbation analysis for Parisian options

H. Leahu, B.F. Heidergott, W. Volk-Makarewicz

Research output: Contribution to JournalArticleAcademicpeer-review

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.
Original languageEnglish
Pages (from-to)469-474
JournalIEEE Transactions on Automatic Control
Volume60
Issue number2
Early online date23 May 2014
DOIs
Publication statusPublished - 2015

Cite this

Leahu, H. ; Heidergott, B.F. ; Volk-Makarewicz, W. / A smoothed perturbation analysis for Parisian options. In: IEEE Transactions on Automatic Control. 2015 ; Vol. 60, No. 2. pp. 469-474.
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A smoothed perturbation analysis for Parisian options. / Leahu, H.; Heidergott, B.F.; Volk-Makarewicz, W.

In: IEEE Transactions on Automatic Control, Vol. 60, No. 2, 2015, p. 469-474.

Research output: Contribution to JournalArticleAcademicpeer-review

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AB - 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.

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