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Fast binomial procedures for pricing Parisian/ParAsian options

Marcellino Gaudenzi 1 Antonino Zanette 1
1 MATHRISK - Mathematical Risk handling
Inria Paris-Rocquencourt, UPEM - Université Paris-Est Marne-la-Vallée, ENPC - École des Ponts ParisTech
Abstract : The discrete procedures for pricing Parisian/ParAsian options depend, in general, by three dimensions: time, space, time spent over the barrier. Here we present some combinatorial and lattice procedures which reduce the computational complexity to second order. In the European case the reduction was already given by Lyuu-Wu \cite{WU} and Li-Zhao \cite{LZ}, in this paper we present a more efficient procedure in the Parisian case and a different approach (again of order 2) in the ParAsian case. In the American case we present new procedures which decrease the complexity of the pricing problem for the Parisian/ParAsian knock-in options. The reduction of complexity for Parisian/ParAsian knock-out options is still an open problem.
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https://hal.inria.fr/hal-00721958
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Submitted on : Tuesday, July 31, 2012 - 10:53:18 AM
Last modification on : Wednesday, February 26, 2020 - 7:06:15 PM
Long-term archiving on: : Thursday, November 1, 2012 - 2:30:58 AM

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Marcellino Gaudenzi, Antonino Zanette. Fast binomial procedures for pricing Parisian/ParAsian options. [Research Report] RR-8033, INRIA. 2012, pp.15. ⟨hal-00721958⟩

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