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Let's suppose one is valuing a Euro call on a ZCB in a Black-Derman-Toy lattice. How many nodes/levels of discretization are optimal? Obviously too many creates computational issues and too few creates low precision. What is the best way to determine the optimal number of nodes?

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100 is probably a minimum but it depends on your computational power at hand. Usually before putting a numerical algorithm in production quants run extensive convergence accuracy vs. CPU time analysis to decide on the appropriate parameters setup.

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