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

Yuriy Krepkiy, Asif Lakhany and Amber Zhang

Papers from arXiv.org

Abstract: 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.

Date: 2021-05
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