Abstract
Abstract 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.
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