Explicit Bounds for Approximation Rates for Boundary Crossing Probabilities for the Wiener Process
We give explicit upper bounds for convergence rates when approximating (both one- and two-sided general curvlinear) boundary crossing probabilities for the Wiener process by similar probabilities for close boundaries (of simpler form for which computing the possibility is feasible). In particular, we generalize and improve results obtained by Potzelberger and Wang  for the case when approximating boundaries are piecewise linear. Applications to barrier option pricing are discussed as well.
|Date of creation:||01 Jan 2004|
|Date of revision:|
|Publication status:||Published as: Borovkov, K.N. Novikov, A., 2005, "Explicit Bounds for Approximation Rates for Boundary Crossing Probabilities for the Wiener Process", Journal of Applied Probability, 42(1), 82-92.|
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- G. O. Roberts & C. F. Shortland, 1997. "Pricing Barrier Options with Time-Dependent Coefficients," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 83-93.
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