A Hybrid Finite Difference Method for Pricing Two-Asset Double Barrier Options

The pricing of the two-asset double barrier option is modeled as an initial-boundary value problem of the two-dimensional BlackScholes partial differential equation. We use the hybrid finite different method to solve the problem. The hybrid method is a combination of the Laplace transformand a finite difference method. It ismore efficient than a traditional finite difference method to obtain a solutionwithout a step-by-step process. Themethod is implemented on a computer. Two numerical examples are calculated to verify the performance of the hybrid method. In our numerical examples, the convergence rate of the method is approximately two. We conclude that the method is efficient for pricing two-asset barrier options.