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

Table 2

Pricing the European standard option with the LARS method.

	European standard call option						European standard put option
	Regime 1			Regime 2			Regime 1			Regime 2
	Price	Difference	Ratio	Price	Difference	Ratio	Price	Difference	Ratio	Price	Difference	Ratio
20	12.7776	−0.0094	0.5159	15.8842	−0.0597	0.4971	8.4479	0.0192	0.4939	10.3216	−0.0158	0.4899
40	12.7681	−0.0049	0.5072	15.8245	−0.0297	0.4985	8.4671	0.0095	0.4972	10.3058	−0.0077	0.4948
80	12.7633	−0.0025	0.5034	15.7948	−0.0148	0.4993	8.4766	0.0047	0.4987	10.2981	−0.0038	0.4974
160	12.7608	−0.0012	0.5017	15.7801	−0.0074	0.4996	8.4814	0.0024	0.4993	10.2942	−0.0019	0.4987
320	12.7596	−0.0006	0.5008	15.7727	−0.0037	0.4998	8.4837	0.0012	0.4997	10.2923	−0.0010	0.4993
640	12.7589	−0.0003	0.5004	15.7690	−0.0018	0.4999	8.4849	0.0006	0.4999	10.2914	−0.0005	0.4997
1280	12.7586	−0.0002	0.5001	15.7671	−0.0009	0.4999	8.4855	0.0003	0.5000	10.2909	−0.0002	0.4998
2560	12.7585	−0.0001		15.7662	−0.0004		8.4858	0.0001		10.2907	−0.0001
5120	12.7584			15.7658			8.4859			10.2906