Table 3 RESULTS OF GENETIC ADAPTIVE NEURAL NETWORK (GANN) APPROXIMATION OF EURODOLLAR CALL FUTURES OPTION TRADED ON LIFFE Panel A: Training Data Set |
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CS OPM Approximation |
GANN Approximation |
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Sub-sample Description |
Number of Observations |
Mean Squared Error (MSE) |
Mean Absolute Error (MAE) |
Mean Squared Error (MSE) |
Mean Absolute Error (MAE) |
Complete Sample |
2000 | 0.02012 |
0.07743 | 0.00047 |
0.01589 |
M* > .01 |
790 | 0.02939 |
0.10903 | 0.00066 |
0.02012 |
.01 < M < 1 |
517 | 0.03381 |
0.11526 | 0.00072 |
0.02083 |
M > 1 |
271 | 0.02116 |
0.09785 | 0.00055 |
0.01871 |
M < -.01 |
1202 | 0.01348 |
0.05568 | 0.00033 |
0.01306 |
-1 < M < -.01 |
577 | 0.02641 |
0.09886 | 0.00048 |
0.01597 |
M < -1 |
619 | 0.00155 |
0.01575 | 0.00019 |
0.01028 |
-.01 < M < .01 |
8 | 0.10399 |
0.22549 | 0.00140 |
0.02345 |
Panel B: Holdout Data Set, HOLDOUT1 |
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Complete Sample |
6887 | 0.01759 |
0.07162 | 0.00051 |
0.01677 |
M* > .01 |
2698 | 0.02822 |
0.10593 | 0.00071 |
0.02098 |
.01 < M < 1 |
1782 | 0.03290 |
0.11229 | 0.00076 |
0.02159 |
M > 1 |
910 | 0.01912 |
0.09361 | 0.00061 |
0.01978 |
M < -.01 |
4159 | 0.01051 |
0.04892 | 0.00038 |
0.01399 |
-1 < M < -.01 |
1840 | 0.02174 |
0.09017 | 0.00059 |
0.01722 |
M < -1 |
2312 | 0.00159 |
0.01608 | 0.00022 |
0.01143 |
-.01 < M < .01 |
30 | 0.04373 |
0.13311 | 0.00117 |
0.02360 |
| * M is a measure of the degree of moneyness. For example, if the strike rate (100 - K) is greater than the futures rate (F(t)), a call option on a 3-month Eurodollar futures contract will be in-the-money. Therefore, M is defined as (100 - K) - F(t), and when M > .01 the call option is in-the-money. | |||||