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?
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.