Mastering Python for Finance - Second Edition

A class for pricing down-and-out-options using the Crank-Nicolson method of finite differences

Let's create a class named FDCnDo that inherits from the FDCnEu class we discussed earlier. We will take into account the barrier price in the constructor method, while leaving the rest of the Crank-Nicolson implementation in the FDCnEu class unchanged:

In [ ]:    import numpy as np    """    Price a down-and-out option by the Crank-Nicolson    method of finite differences.    """    class FDCnDo(FDCnEu):        def __init__(            self, S0, K, r=0.05, T=1, sigma=0,             Sbarrier=0, Smax=1, M=1, N=1, is_put=False        ):            super(FDCnDo, self).__init__(                S0, K, r=r, T=T, sigma=sigma,                Smax=Smax, M=M, N=N, is_put=is_put            )            self.barrier = Sbarrier self.boundary_conds = np.linspace(Sbarrier, ...