Pathwise CVA Regressions With Oversimulated Defaults

Code

• github.com/bouazzase/neuralxva
  OfficialIn paperpytorch★ 9

Abstract

We consider the computation by simulation and neural net regression of conditional expectations, or more general elicitable statistics, of functionals of processes (X, Y ). Here an exogenous component Y (Markov by itself) is time-consuming to simulate, while the endogenous component X (jointly Markov with Y) is quick to simulate given Y, but is responsible for most of the variance of the simulated payoff. To address the related variance issue, we introduce a conditionally independent, hierarchical simulation scheme, where several paths of X are simulated for each simulated path of Y. We analyze the statistical convergence of the regression learning scheme based on such block-dependent data. We derive heuristics on the number of paths of Y and, for each of them, of X, that should be simulated. The resulting algorithm is implemented on a graphics processing unit (GPU) combining Python/CUDA and learning with PyTorch. A CVA case study with a nested Monte Carlo benchmark shows that the hierarchical simulation technique is key to the success of the learning approach.

Tasks

Reproductions