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A numerical method for pricing discrete double barrier option by Chebyshev polynomials

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Abstract

In this article, a fast numerical method based on orthogonal Chebyshev polynomials for pricing discrete double barrier option is illustrated. At first, a recursive formula for computing price of discrete double barrier option is obtained. Then, these recursive formulas are estimated by Chebyshev polynomials and expressed in operational matrix form that reduce CPU time of algorithm. Finally, the effectiveness and validity of the presented method is demonstrated by comparison with the obtained numerical results with some other algorithms.

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Authors and Affiliations

  1. School of Mathematics, Iran University of Science and Technology, Tehran, 16844, Iran

    Rahman Farnoosh

  2. Department of Statistics, Islamic Azad University, Science and Research Branch, Tehran, Iran

    Fatemeh Kamalzadeh

  3. Department of Statistics, Islamic Azad University, North Branch, Tehran, Iran

    Kianoosh Fathi

Authors
  1. Fatemeh Kamalzadeh
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  2. Rahman Farnoosh
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  3. Kianoosh Fathi
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Correspondence to Rahman Farnoosh.

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Kamalzadeh, F., Farnoosh, R. & Fathi, K. A numerical method for pricing discrete double barrier option by Chebyshev polynomials. Math Sci 14, 91–96 (2020). https://doi.org/10.1007/s40096-020-00319-8

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  • DOI: https://doi.org/10.1007/s40096-020-00319-8

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