### Abstract

The pricing of the two-asset double barrier option is modeled as an initial-boundary value problem of the two-dimensional Black-Scholes partial differential equation. We use the hybrid finite different method to solve the problem. The hybrid method is a combination of the Laplace transform and a finite difference method. It is more efficient than a traditional finite difference method to obtain a solution without a step-by-step process. The method is implemented on a computer. Two numerical examples are calculated to verify the performance of the hybrid method. In our numerical examples, the convergence rate of the method is approximately two. We conclude that the method is efficient for pricing two-asset barrier options.

Original language | English |
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Article number | 692695 |

Journal | Mathematical Problems in Engineering |

Volume | 2015 |

DOIs | |

Publication status | Published - 2015 Jan 1 |

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### All Science Journal Classification (ASJC) codes

- Mathematics(all)
- Engineering(all)

### Cite this

*Mathematical Problems in Engineering*,

*2015*, [692695]. https://doi.org/10.1155/2015/692695

}

*Mathematical Problems in Engineering*, vol. 2015, 692695. https://doi.org/10.1155/2015/692695

**A hybrid finite difference method for pricing two-asset double barrier options.** / Hsiao, Y. L.; Shen, Shih-Yu; Wang, Andrew M.L.

Research output: Contribution to journal › Article

TY - JOUR

T1 - A hybrid finite difference method for pricing two-asset double barrier options

AU - Hsiao, Y. L.

AU - Shen, Shih-Yu

AU - Wang, Andrew M.L.

PY - 2015/1/1

Y1 - 2015/1/1

N2 - The pricing of the two-asset double barrier option is modeled as an initial-boundary value problem of the two-dimensional Black-Scholes partial differential equation. We use the hybrid finite different method to solve the problem. The hybrid method is a combination of the Laplace transform and a finite difference method. It is more efficient than a traditional finite difference method to obtain a solution without a step-by-step process. The method is implemented on a computer. Two numerical examples are calculated to verify the performance of the hybrid method. In our numerical examples, the convergence rate of the method is approximately two. We conclude that the method is efficient for pricing two-asset barrier options.

AB - The pricing of the two-asset double barrier option is modeled as an initial-boundary value problem of the two-dimensional Black-Scholes partial differential equation. We use the hybrid finite different method to solve the problem. The hybrid method is a combination of the Laplace transform and a finite difference method. It is more efficient than a traditional finite difference method to obtain a solution without a step-by-step process. The method is implemented on a computer. Two numerical examples are calculated to verify the performance of the hybrid method. In our numerical examples, the convergence rate of the method is approximately two. We conclude that the method is efficient for pricing two-asset barrier options.

UR - http://www.scopus.com/inward/record.url?scp=84924214219&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84924214219&partnerID=8YFLogxK

U2 - 10.1155/2015/692695

DO - 10.1155/2015/692695

M3 - Article

VL - 2015

JO - Mathematical Problems in Engineering

JF - Mathematical Problems in Engineering

SN - 1024-123X

M1 - 692695

ER -