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Multinomial tree method of pricing American put

L

lionelliem

Joined
8/9/13
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1
Points
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I've been trying to figure out how to price American put options driven by levy processes using a lattice based method from this paper:http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9965.2006.00286.x/abstract .

But I'm stuck at a part where the authors chose a variable b( n) in one of the steps but don't really explain how they chose b( n) for pricing. If anyone has read the paper or is so kind as to take a look at the link, could you please provide me with some explanation regarding b( n)? I have been stuck on this problem for quite some time now.

Thanks a lot!
 

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