Pricing Discrete Barrier and Hindsight Options with the Tridiagonal Probability Algorithm
提出一种基于布朗运动相关矩阵三对角结构的算法，能高效精确地计算离散监测的障碍期权和回顾期权价格，尤其适用于障碍水平异常或监测次数较多的情况。
This paper develops an algorithm to calculate the Brownian multivariate normal probability subject to any preset error tolerance criteria. The algorithm is founded upon the computational simplicity of the tridiagonal structure of the inverse of the Brownian correlation matrix. Compared with existing pricing technologies without the “barrier too close” problem, our calculation method can produce a more accurate and efficient analytic evaluation of barrier options monitored at discrete instants with well- or ill-behaved barrier levels, or discrete hindsight options, for a reasonably large number of monitorings.