Pricing occupation-time options in a mixed-exponential jump-diffusion model

TL;DR

This paper develops methods to price occupation-time options by deriving joint distributions for a mixed-exponential jump-diffusion process and its occupation times, enabling more accurate valuation of complex financial derivatives.

Contribution

It introduces new analytical formulas for joint distributions involving mixed-exponential jump-diffusions and occupation times, advancing option pricing techniques.

Findings

Derived joint distributions for mixed-exponential jump-diffusions and occupation times.

Provided valuation formulas for occupation-time options like double-barrier and quantile options.

Enhanced accuracy in pricing complex derivatives with jump processes.

Abstract

In this short paper, in order to price occupation-time options, such as (double-barrier) step options and quantile options, we derive various joint distributions of a mixed-exponential jump-diffusion process and its occupation times of intervals.