Numerical method for discrete double barrier option pricing with time-dependent parameters. (October 2015)

• Record Type: Journal Article
• Authors: Farnoosh, R.; Sobhani, Amirhossein; Rezazadeh, Hamidreza; Beheshti, Mohammad Hossein
• Is Part Of: Computers & mathematics with applications. Volume 70:issue 8(2015)
• Page Start: 2006
• Page End: 2013
• Publication Date: 2015-10
• Subjects: Electronic data processing -- Periodicals; Mathematics -- Data processing -- Periodicals; 510.28541
• DOI: 10.1016/j.camwa.2015.08.016
• Languages: English
• ISSNs: 0898-1221

Abstract

<abstract xml:lang="en" abstract-type="author" id="a000005"> <title id="st000005">Abstract</title> <sec> <p id="sp000020">In this paper, the main purpose is pricing of discrete double barrier option under <italic>Black–Scholes</italic> framework with time dependent parameters. By some conventional transforms, in each monitoring interval, the problem is reduced to well-known Black–Scholes partial differential equations with convenient constant coefficient such that the solution can be expressed recursively upon the heat equation solution. Finally a numerical method is proposed to compute the obtained recursive formula efficiently. Also, the Greeks of contract are calculated.</p> </sec> </abstract>