City Research Online

Corridor options and arc-sine law

Fusai, G. (2000). Corridor options and arc-sine law. ANNALS OF APPLIED PROBABILITY, 10(2), pp. 634-663.

Abstract

We study a generalization of the arc-sine law. In particular we provide new results about the distribution of the time spent by a BM with drift inside a band, giving the Laplace transform of the characteristic function. If one of the extremes of the band goes to infinity, our formula agrees with the results given in Akahori and Takacs. We apply these results to the pricing of exotic option contracts known as corridor derivatives. We then discuss the inversion problem comparing different numerical methods.

Publication Type: Article
Subjects: H Social Sciences
H Social Sciences > HA Statistics
H Social Sciences > HG Finance
Q Science > QA Mathematics
Departments: Cass Business School > Finance
Related URLs:
URI: http://openaccess.city.ac.uk/id/eprint/16342
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