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

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.wiener process, boundary crossing probabilities; barrier options