XVA Principles, Nested Monte Carlo Strategies, and GPU Optimizations

We present a nested Monte Carlo (NMC) approach implemented on graphics processing units (GPU) to X-valuation adjustments (XVA), where X ranges over C for credit, F for funding, M for margin, and K for capital. The overall XVA... [ view full abstract ]

We present a nested Monte Carlo (NMC) approach implemented on graphics processing units (GPU) to X-valuation adjustments (XVA), where X ranges over C for credit, F for funding, M for margin, and K for capital. The overall XVA suite involves five compound layers of dependence. Higher layers are launched first and trigger nested simulations on-the-fly whenever required in order to compute an item from a lower layer. With GPUs, error controlled NMC XVA computations are within reach. This is illustrated on XVA computations involving equities, interest rate, and credit derivatives, for both bilateral and central clearing XVA metrics.