Research Article
New Methods with Capped Options for Pricing American Options
Table 2
Numerical results for Example
2.
| | Steps | CRR binomial tree | Error | Rate | Improved binomial tree | Error | Rate |
| | 100 | 5.555259412 | −0.012819 | — | 5.57314351 | 0.00506440 | — | | 200 | 5.561670746 | −0.006408 | 1.0003342 | 5.57065882 | 0.00257971 | 0.97317924 | | 400 | 5.564883789 | −0.003195 | 1.0039956 | 5.56939269 | 0.00131358 | 0.97370770 | | 800 | 5.566492564 | −0.001586 | 1.0100720 | 5.56875293 | 0.00067382 | 0.96305278 | | 1600 | 5.567298182 | −0.000780 | 1.0226286 | 5.56843027 | 0.00035116 | 0.94021553 |
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