  We study the principal component analysis (PCA) based approach introduced by
Reisinger & Wittum (2007) for the approximation of Bermudan basket option
values via partial differential equations (PDEs). This highly efficient
approximation approach requires the solution of only a limited number of
low-dimensional PDEs complemented with optimal exercise conditions. It is
demonstrated by ample numerical experiments that a common discretization of the
pertinent PDE problems yields a second-order convergence behaviour in space and
time, which is as desired. It is also found that this behaviour can be somewhat
irregular, and insight into this phenomenon is obtained.
