Research Article
Pricing Convertible Bonds with Credit Risk under Regime Switching and Numerical Solutions
Table 3
Comparison of the finite difference and the trinomial tree.
| | Time steps | 200 | 400 | 800 | 1600 | 3200 | 6400 | 128000 |
| | Finite difference | Regime 1 | 108.7974 | 108.7925 | 108.7835 | 108.7754 | 108.7666 | 108.7606 | 108.7569 | | Regime 2 | 110.1492 | 110.1557 | 110.1538 | 110.1500 | 110.1437 | 110.1392 | 110.1363 | | Computation time (s) | 119.0600 |
253.1584 | 504.5852 | 1113.8 | 2275.4 | 4983.7 | 10823 |
| | Trinomial tree | Regime 1 | 108.9136 | 108.7876 | 108.7509 | 1087970 | 108.7581 | 108.7841 | 108.7598 | | Regime 2 | 110.2378 | 110.1481 | 110.1272 | 110.1639 | 110.1367 | 110.1578 | 110.1389 | | Computation time (s) | 0.8580 | 3.1980 | 11.4817 | 46.3323 | 192.5520 | 763.3285 | 2932.1 |
|
|
