Path integral pricing of Wasabi option in the Black–Scholes model

Aurelien Cassagnes, Yu Chen and Hirotada Ohashi

Physica A: Statistical Mechanics and its Applications, 2014, vol. 413, issue C, 1-10

Abstract: In this paper, using path integral techniques, we derive a formula for a propagator arising in the study of occupation time derivatives. Using this result we derive a fair price for the case of the cumulative Parisian option. After confirming the validity of the derived result using Monte Carlo simulation, a new type of heavily path dependent derivative product is investigated. We derive an approximation for our so-called Wasabi option fair price and check the accuracy of our result with a Monte Carlo simulation.

Keywords: Cumulative Parisian option; Path integral; Wasabi option (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:413:y:2014:i:c:p:1-10

DOI: 10.1016/j.physa.2014.07.012

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