IDEAS home Printed from https://ideas.repec.org/a/taf/quantf/v11y2011i8p1207-1220.html
   My bibliography  Save this article

Parisian exchange options

Author

Listed:
  • An Chen
  • Michael Suchanecki

Abstract

The option to exchange one asset for another is one of the oldest and one of the most popular exotic options. In the present article, we extend the existing literature on options to Parisian exchange options, i.e. the option to exchange one asset for the other contingent on the occurrence of the Parisian time. Thus, these options are a special kind of barrier option which is knocked out or knocked in only if the value of the first asset is worth more than the other for a certain period of time, i.e. the ratio of the assets must be above or below one (or, in general, a given barrier) for a certain period of time. We derive closed-form solutions in terms of Laplace transforms for these options, introduce new options which are automatically exercised at the Parisian time, conduct some illustrative numerical analyses and give a number of examples from structured equity products, corporate finance, M&A, risk arbitrage and life insurance where the application of Parisian exchange options can be very useful.

Suggested Citation

  • An Chen & Michael Suchanecki, 2011. "Parisian exchange options," Quantitative Finance, Taylor & Francis Journals, vol. 11(8), pages 1207-1220.
  • Handle: RePEc:taf:quantf:v:11:y:2011:i:8:p:1207-1220
    DOI: 10.1080/14697680903194577
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/14697680903194577
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:11:y:2011:i:8:p:1207-1220. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RQUF20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.