A Boundary Element Formulation for the Pricing of Barrier Options

• 作者: Shih-Yu Shen Yi-Long Hsiao
• 来源期刊: 建模与仿真(英文)
• 学科: 数学
• 关键词: BOUNDARY Element Method BLACK-SCHOLES Equation Moving BOUNDARY OPTION PRICING BARRIER OPTION
• 年，卷（期）: 2013,（3）
• 页码范围: 30-35
• 页数: 6页
• 分类号: O1

摘要

In this article, we derive a boundary element formulation for the pricing of barrier option. The price of a barrier option is modeled as the solution of Black-Scholes’ equation. Then the problem is transformed to a boundary value problem of heat equation with a moving boundary. The boundary integral representation and integral equation are derived. A boundary element method is designed to solve the integral equation. Special quadrature rules for the singular integral are used. A numerical example is also demonstrated. This boundary element formulation is correct.