An adaptive Monte Carlo approach for pricing Parisian options with general boundaries

Sercan Gűr

Journal of Computational Finance

Abstract: We propose a new, flexible framework using Monte Carlo methods to price Parisian options not only with constant boundaries but also with general curved boundaries. The proposed approach also enables a direct simulation of the Parisian time, namely the first time when a Parisian contract is triggered. Further, we employ an adaptive control variable method to improve the accuracy of the Monte Carlo simulation. Finally, we present numerical examples for the flat and curved barriers and show that our method produces better simulation results than the alternative procedures considered in this paper.

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