Explicit Bounds for Approximation Rates for Boundary Crossing Probabilities for the Wiener Process

K. Borovkov and Alexander Novikov

No 115, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: 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 [13] for the case when approximating boundaries are piecewise linear. Applications to barrier option pricing are discussed as well.

Keywords: wiener process, boundary crossing probabilities; barrier options (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-01-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (5)

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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Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:115

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