Deep xVA Solver – A Neural Network Based Counterparty Credit Risk Management Framework
25 Pages Posted: 3 Jun 2020 Last revised: 25 Aug 2020
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
Suggested Citation: Suggested Citation