A Simple Numerical Method for Pricing an American Put Option

Table 1

Valuation of the American put options.

Safty parameter 𝜌	RMSE	𝛽(𝑇)	𝑃(𝑇,90)	𝑃(𝑇,100)	𝑃(𝑇,110)
5.00	0.0005816	80.8760	11.4926	6.0911	2.9869
5.10	0.0005443	80.8761	11.4925	6.0911	2.9868
5.20	0.0005110	80.8762	11.4925	6.0910	2.9868
5.30	0.0004831	80.8764	11.4924	6.0909	2.9867
5.40	0.0004623	80.8765	11.4924	6.0908	2.9866
5.50	0.0004503	80.8767	11.4923	6.0907	2.9865
5.60	0.0004484	80.8769	11.8760	6.0906	2.9864
5.70	0.0004576	80.8771	11.8771	6.0906	2.9863
5.80	0.0004780	80.8773	11.4922	6.0905	2.9863
5.90	0.0005088	80.8776	11.4921	6.0904	2.9862
6.00	0.0005491	80.8779	11.4920	6.0903	2.9861
Maximum difference	0.0001336	0.0019	0.0006	0.0008	0.0008