Simulation And Optimisation Of European And American "Parisian Option" Pricing Model

A derivative is a financial instrument whose payoff depends on an underlying asset, such as a stock or a future contract. As the financial market becomes more prosperous, various new derivatives are designed to fulfill the needs of investors. Some derivatives are complicated in their terms, and give rise to problems in valuation.A path-dependent option is among all, the most complicated derivative in its valuation. The terminal payoff for an option of such type depends critically on the price path of its underlying financial instrument. In this thesis we develop pricing techniques for American and European Parisian type options. These options have path-dependent feature and their terms vary. We focus on the pricing of consecutive and cumulative Parisian-type options using an adapted trinomial tree model implemented in a C++ program and we present the numerical results obtained with this technique.