Deep xVA solver -- A neural network based counterparty credit risk management framework
Mathematical Finance
2022-12-26 v4 Computational Finance
Pricing of Securities
Risk Management
Abstract
In this paper, we present a novel computational framework for portfolio-wide risk management problems, where the 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.
Keywords
Cite
@article{arxiv.2005.02633,
title = {Deep xVA solver -- A neural network based counterparty credit risk management framework},
author = {Alessandro Gnoatto and Athena Picarelli and Christoph Reisinger},
journal= {arXiv preprint arXiv:2005.02633},
year = {2022}
}
Comments
35 pages. Accepted on SIAM Journal on Financial Mathematics