In this paper, we present a novel computational framework for portfolio-wide risk management problems wherethe presence of a potentially large number of risk factors makes traditional numerical techniques ineffective.The new method utilises a coupled system of BSDEs for the valuation adjustments (xVA) and solves these by a recursive application of a neural network based BSDE solver.This not only makes the computation of xVA for high-dimensional problems feasible, but also produces hedge ratios and dynamic risk measures for xVA, and allows simulations of the collateral account.

Deep xVA solver - A neural network based counterparty credit risk management framework

Alessandro Gnoatto
;
Athena Picarelli;
2023-01-01

Abstract

In this paper, we present a novel computational framework for portfolio-wide risk management problems wherethe presence of a potentially large number of risk factors makes traditional numerical techniques ineffective.The new method utilises a coupled system of BSDEs for the valuation adjustments (xVA) and solves these by a recursive application of a neural network based BSDE solver.This not only makes the computation of xVA for high-dimensional problems feasible, but also produces hedge ratios and dynamic risk measures for xVA, and allows simulations of the collateral account.
2023
CVA, DVA, FVA, ColVA, xVA, EPE, Collateral, xVA hedging, Deep BSDE Solver
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/1024456
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