Efficient Lattice Method for Valuing of Options with Barrier in a Regime Switching Model

Table 13

Pricing the European double barrier put option with the LARS-type method.

	LARS method						LARSI method
	Regime 1			Regime 2			Regime 1			Regime 2
	Price	Difference	Ratio	Price	Difference	Ratio	Price	Difference	Ratio	Price	Difference	Ratio
	12.6678	0.9570	−0.9571	9.2339	1.0463	−0.9747	11.8281	0.0825	0.5818	8.2848	0.1559	0.3274
	13.6248	−0.9160	0.4357	10.2802	−1.0198	0.3518	11.9106	0.0480	0.6612	8.4407	0.0511	0.6639
	12.7088	−0.3991	−1.0572	9.2604	−0.3587	−1.1282	11.9586	0.0317	0.3365	8.4918	0.0339	0.4967
	12.3098	0.4219	−1.0389	8.9017	0.4047	−1.1260	11.9903	0.0107	0.6280	8.5257	0.0168	0.5402
	12.7317	−0.4383	0.1409	9.3064	−0.4557	0.1572	12.0010	0.0067	0.5624	8.5425	0.0091	0.5195
	12.2934	−0.0617	−1.0474	8.8507	−0.0716	−1.0811	12.0077	0.00368	0.5285	8.5516	0.0047	0.4499
	12.2316	0.0647	−0.9775	8.7791	0.0774	−0.9625	12.0115	0.0020	0.3737	8.5563	0.0021	0.3817
	12.2963	−0.0632		8.8565	−0.0745		12.0135	0.0007		8.5585	0.0008
	12.2331			8.7820			12.0142			8.5593