Many derivative practitioners use a Brute Force Monte Carlo approach for counterparty credit exposure calculations, as it is a well-established method for risk assessment. However, for exotic derivatives which require Monte Carlo pricing, the Brute Force approach results in nested simulations – one set of simulations to generate future market scenarios, plus another set of simulations to generate instrument prices for each future market scenario. For a portfolio of exotic deals, this requires a large number of simulation paths for each instrument and it can become very computationally demanding and time consuming.
Numerix has implemented an Algorithmic Exposure (American Monte Carlo) approach which addresses the performance issues typically observed with the Brute Force approach, while maintaining the accuracy of the exposure calculations. While this approach has been implemented in several Tier 1 banks, many practitioners are still unfamiliar with this approach and are not benefitting from the orders-of-magnitude speed advantage and accuracy it provides over traditional methods.
In this webinar recorded on February 19, 2014 featured speakers Saeed Siddiqui and Mohit Agarwal discussed Numerix’s Algorithmic Exposure approach and how it compares to a Brute Force approach for Counterparty Credit Exposure calculations.
During this exclusive, clients-only presentation, Mr. Saddiqui and Mr. Agarwal will cover:
Introduction to the traditional Brute Force approach
Primer on the American Monte Carlo approach
Comparison of the two approaches
Review of Counterparty Credit Exposure basics
Benchmarking of Numerix PFE/EPE profiles with the published literature
Saeed Siddiqui, SVP Release Engineering and QA, Numerix
Mr Siddiqui is currently heading the Release Engineering and Quality Assurance area, which is responsible for Builds Engineering, Financial Validation, and Quality Assurance. Before joining Numerix, he has held roles in International Project Management, Development Manager and Quality Assurance at MarketAxess, Thomson Reuters, Rockwell Collins and as World Bank Consultant. He holds a Masters and Bachelors in Computer Science / Software Engineering from McGill University. He also holds ISTQB certification. He is also an Advisor to Rutgers University Math Finance Program.
Mohit Agarwal, FRM, Director of Financial Validation Engineering, Quality Assurance, Numerix
Mr. Agarwal is currently leading the Financial Validation area of Quality Assurance group, which is responsible for financial correctness of all the features and bug fixes in Numerix products & solutions. Before joining Numerix, he has held roles in financial software development at Tata Consultancy Services. He holds a Master’s degree in Mathematical Finance from Rutgers University and Bachelors in Engineering and FRM certification.
Moderator: Jim Jockle, Chief Marketing Officer, Numerix
Mr. Jockle leads the company's global marketing efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to customers in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Prior to joining Numerix, he served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, Mr. Jockle built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. He also oversaw the brand development of a new company dedicated to the enhancement of credit derivative and structured-credit ratings, products and services. Prior to Fitch, Mr. Jockle was a member of the communications team at Moody's Investors Service.