Research Article
New Methods with Capped Options for Pricing American Options
Table 3
Numerical results for Example
3.
| | Steps | CRR binomial tree | Error | Rate | Improved binomial tree | Error | Rate |
| | 100 | 6.07615754 | −0.013941 | — | 6.09471576 | 0.00461651 | — | | 200 | 6.08313793 | −0.006961 | 1.0019746 | 6.09242930 | 0.00233005 | 0.98644161 | | 400 | 6.08663147 | −0.003467 | 1.0053502 | 6.09128023 | 0.00118098 | 0.98037573 | | 800 | 6.08837907 | −0.001720 | 1.0114551 | 6.09070422 | 0.00060497 | 0.96504590 | | 1600 | 6.08925308 | −0.000846 | 1.0235380 | 6.09041584 | 0.00031659 | 0.93422088 |
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