Canonical Least-Squares Monte Carlo Valuation of American Options: Convergence and Empirical Pricing Analysis
Table 5
OEX put prices computed using the previous 130 daily closing prices of the S&P 100 Index.
Moneyness
Maturity
Short
Medium
Long
Method
CLM
FD
BT
CLM
FD
BT
CLM
FD
BT
DOTM
RMSE
2.102
3.132
2.985
2.854
3.087
3.052
6.260
5.720
6.053
MPE
3.123
1.381
2.394
MAE (%)
40.602
54.780
50.641
36.230
44.035
41.875
36.372
35.322
36.024
Number of puts
30113
19535
3721
OTM
RMSE
4.208
4.970
5.203
5.603
4.282
5.203
13.483
10.444
12.356
MPE
0.029
0.093
2.147
10.081
5.743
8.215
MAE (%)
17.625
26.530
28.030
17.523
17.738
16.936
22.873
20.331
21.658
Number of puts
26243
15392
3630
ITM
RMSE
4.008
4.520
4.238
8.053
5.052
5.965
17.073
13.234
14.354
MPE
1.139
1.183
1.256
5.617
2.481
3.250
14.651
10.213
11.032
MAE (%)
9.655
13.284
12.359
11.403
6.278
8.216
20.393
13.421
18.310
Number of puts
26066
14624
3692
DITM
RMSE
2.030
2.134
2.165
6.265
4.753
5.034
22.680
15.360
18.235
MPE
0.342
4.389
2.793
3.240
18.019
12.282
15.201
MAE (%)
1.356
1.450
1.531
4.357
2.942
4.023
11.920
8.403
10.326
Number of puts
35458
22315
7341
Note. This table reports the empirical results for OEX puts using the previous 130 daily closing prices as inputs. Each cell represents a particular combination of moneyness and time to maturity. The last row reports the number of options with corresponding combination. The remaining rows show the error statistic results of RMSE, MPE, and MAE.
