A game or Israeli option is an American style option where both the writer and the holder have the right to terminate the contract\nbefore the expiration time. Kifer (2000) shows that the fair price for this option can be expressed as the value of a Dynkin game.\nIn general, there are no explicit formulas for fair prices of American and game options and approximations are used for their\ncomputations.The paper by Lamberton (1998) provides error estimates for binomial approximation of American put options and\nhere we extend the approach of Lamberton (1998) in order to obtain error estimates for binomial approximations of game put\noptions which is more complicated as it requires us to deal with two free boundaries corresponding to the writer and to the holder\nof the game option.
Loading....