CVA Sensitivities, Hedging and Risk

St\'ephane Cr\'epey, Botao Li, Hoang Nguyen and Bouazza Saadeddine
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St\'ephane Cr\'epey: UFR Math\'ematiques UPCit\'e
Botao Li: LPSM
Hoang Nguyen: IES, LPSM

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Abstract: We present a unified framework for computing CVA sensitivities, hedging the CVA, and assessing CVA risk, using probabilistic machine learning meant as refined regression tools on simulated data, validatable by low-cost companion Monte Carlo procedures. Various notions of sensitivities are introduced and benchmarked numerically. We identify the sensitivities representing the best practical trade-offs in downstream tasks including CVA hedging and risk assessment.

Date: 2024-07
New Economics Papers: this item is included in nep-big, nep-cmp and nep-rmg
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