Deep xVA solver - A neural network based counterparty credit risk management framework
22 Pages Posted:
Date Written: May 6, 2020
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: CVA, DVA, FVA, ColVA, xVA, EPE, Collateral, xVA hedging, Deep BSDE Solver
JEL Classification: G12, G13, C63
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