Numerical algorithm for discrete barrier option pricing in a Black-Scholes model with stationary process

Document Type: Research Paper


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

2 Department of Mathematics, Islamic Azad University Karaj Branch

3 Department of Mathematics, Faculty of Mathematics, Statistics and Computer Science, Semnan University, Semnan, Iran


In this article, we propose a numerical algorithm for computing price of discrete single and double barrier option under the \emph{Black-Scholes} model. In virtue of some general transformations, the partial differential equations of option pricing in different monitoring dates are converted into simple diffusion equations. The present method is fast compared to alternative numerical methods presented in previous papers.