Pricing Moving Window Parisian Option and Applications in Convertible Bonds

摘要

Parisian options are complex path-dependent options developed by barrier option. Moving window Parisian options are higher path-dependent options, which are widely used in the field of convertible bonds in recent years. In this work we propose to price moving window Parisian option by use of hitting time. A simulation algorithm of the pricing is presented. As an application, we provide the pricing equations of convertible bonds with reset clause. Furthermore our simulation method is applied to price convertible bonds with reset clause using the data in China mainland stock exchange. The results show that this algorithm can undoubtedly improve the accuracy of the convertible bonds pricing.