Research Article
New Methods with Capped Options for Pricing American Options
Table 1
Numerical results for Example
1.
| | Steps | CRR binomial tree | Error | Rate | Improved binomial tree | Error | Rate |
| | 100 | 4.775603311 | −0.00699 | — | 4.787452236 | 0.0048597 | — | | 200 | 4.779176352 | −0.00342 | 1.032747 | 4.785155998 | 0.002563463 | 0.922773287 | | 400 | 4.780890888 | −0.0017 | 1.005453 | 4.78396397 | 0.001371434 | 0.902408294 | | 800 | 4.781760011 | −0.00083 | 1.031369 | 4.783305899 | 0.000713364 | 0.942975933 | | 1600 | 4.782184168 | −0.00041 | 1.027623 | 4.782971819 | 0.000379283 | 0.911362084 |
|
|
