Error estimates for binomial approximations of game put options (Q2510955)

Summary: A game or Israeli option is an American style option where both the writer and the holder have the right to terminate the contract before the expiration time. In [Finance Stoch. 4, No. 4, 443--463 (2000; Zbl 1066.91042)], the second author shows that the fair price for this option can be expressed as the value of a Dynkin game. In general, there are no explicit formulas for fair prices of American and game options and approximations are used for their computations. The paper by \textit{D. Lamberton} [Ann. Appl. Probab. 8, No. 1, 206--233 (1998; Zbl 0939.60022)] provides error estimates for binomial approximation of American put options and here, we extend the approach of Lamberton [loc. cit.] in order to obtain error estimates for binomial approximations of game put options which is more complicated as it requires us to deal with two free boundaries corresponding to the writer and to the holder of the game option.