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

Table 3

Pricing the American standard option with the LARS method.

	American standard call option						American 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	8.8606	0.0236	0.5507	10.9320	−0.0165	0.4796
40	12.7681	−0.0049	0.5072	15.8245	−0.0297	0.4985	8.8842	0.0130	0.4353	10.9154	−0.0079	0.6365
80	12.7633	−0.0025	0.5034	15.7948	−0.0148	0.4993	8.8972	0.0057	0.4692	10.9075	−0.0050	0.5010
160	12.7608	−0.0012	0.5017	15.7801	−0.0074	0.4996	8.9028	0.0027	0.4577	10.9024	−0.0025	0.5487
320	12.7596	−0.0006	0.5008	15.7727	−0.0037	0.4998	8.9055	0.0012	0.4671	10.8999	−0.0014	0.5362
640	12.7589	−0.0003	0.5004	15.7690	−0.0018	0.4999	8.9067	0.0006	0.4812	10.8985	−0.0007	0.5156
1280	12.7586	−0.0002	0.5001	15.7671	−0.0009	0.4999	8.9073	0.0003	0.4756	10.8978	−0.0004	0.5194
2560	12.7585	−0.0001		15.7662	−0.0004		8.9075	0.0002		10.8974	−0.0002
5120	12.7584			15.7658			8.9077			10.8972