Time-dependent barrier options and boundary crossing probabilities

A. Novikov, V. Frishling, N. Kordzakhia

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)


The problem of pricing of time-dependent barrier options is considered in the case when interest rate and volatility are given functions in Black-Scholes framework. The calculation of the fair price reduces to the calculation of non-linear boundary crossing probabilities for a standard Brownian motion. The proposed method is based on a piecewise-linear approximation for the boundary and repeated integration. The numerical example provided draws attention to the performance of suggested method in comparison to some alternatives.
Original languageEnglish
Pages (from-to)325-334
Number of pages10
JournalGeorgian Mathematical Journal
Issue number2
Publication statusPublished - 2003
Externally publishedYes


  • First passage times
  • Wiener process
  • Girsanov transformation
  • numerical integration


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