Brownian excursions in a corridor and related Parisian options

Angelos Dassios and Shanle Wu

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this paper, we study the excursion time of a Brownian motion with drift inside a corridor by using a four states semi-Markov model. In mathematical finance these results have an important application in the valuation of options whose prices depend on the time their underlying assets prices spend between two different values. In this paper, we introduce the Parisian corridor option and obtain an explicit expression for the Laplace transform of its price formula.

Keywords: excursion time; four states Semi-Markov model; Parisian corridor options; Laplace transform (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011-03
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:32042

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