1. Binary Options Pricing Finite Difference Methods Chi Zhang Niklas Wikén Carmina Fjellström October 3, 2013

2. Background Binary options Cash-or-nothing Asset-or-nothing

3. Cash-or-Nothing (Call) Payoff K S V(T) C

4. Asset-or-Nothing (Call) Payoff K S V(T)

5. Implementation Backward Differentiation Formula, Second Order (BDF-2) for time-stepping

6. Conditions Final Condition: Boundary Conditions: Cash-or-nothing Boundary Conditions: Asset-or-nothing

11. Cash-or-Nothing: Error w.r.t

13. Asset-or-Nothing: Error w.r.t

15. THE END