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

Yuriy Krepkiy; Asif Lakhany; Amber Zhang

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arXiv · 2105.07061

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

Yuriy Krepkiy·Asif Lakhany·Amber Zhang

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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.

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Yuriy Krepkiy, Asif Lakhany, Amber Zhang. 2021-05-14. Efficient Least Squares Monte-Carlo Technique for PFE/EE Calculations. https://arxiv.org/abs/2105.07061

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