Efficient Least Squares Monte-Carlo Technique for PFE/EE Calculations

Amber Zhang; Asif Lakhany; Yuriy Krepkiy

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Efficient Least Squares Monte-Carlo Technique for PFE/EE Calculations

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arxiv 2105.07061 v1 pith:7VCU53A5 submitted 2021-05-14 q-fin.CP

Yuriy Krepkiy , Asif Lakhany , Amber Zhang This is my paper · ORCID

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keywords carlomontemethodcalculationsleastmonte-carloportfolioreferred

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We describe a regression-based method, generally referred to as the Least Squares Monte Carlo (LSMC) method, to speed up exposure calculations of a portfolio. We assume that the portfolio contains several exotic derivatives that are priced using Monte-Carlo on each real world scenario and time step. Such a setting is often referred to as a Monte Carlo over a Monte Carlo or a Nested Monte Carlo method.

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