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An Explicit Scheme for Pathwise XVA Computations by Abbas-Turki, Lokman; Crépey, Stéphane; Li, Botao; Saadeddine, Bouazza is a scholarly article available to read on EtoBox.

What is An Explicit Scheme for Pathwise XVA Computations about?

Motivated by the equations of cross valuation adjustments (XVAs) in the realistic case where capital is deemed fungible as a source of funding for variation margin, we introduce a simulation/regression scheme for a class of anticipated BSDEs, where the coefficient entails a conditional expected shortfall of the martingale part of the solution. The scheme is explicit in time and uses neural network least-squares and quantile regressions for the embedded conditional expectations and expected shortfall computations. An a posteriori Monte Carlo validation procedure allows assessing the regression error of the scheme at each time step. The superiority of this scheme with respect to Picard iterations is illustrated in a high-dimensional and hybrid market/default risks XVA use-case.

Author

Abbas-Turki, Lokman; Crépey, Stéphane; Li, Botao; Saadeddine, Bouazza

Published

2024

Language

EN