Efficient SIMM-MVA Calculations for Callable Exotics - See more at: https://www.numerix.com/quantitative-research-paper-efficient-simm-mva-calculations-callable-exotics#sthash.n86Aodky.dpuf

Efficient SIMM-MVA Calculations for Callable Exotics

Computing Standardized Initial Margin Model Margin Valuation Adjustment (SIMM-MVA) requires the simulation of future sensitivities, but these are expensive to compute for callable products.

This paper introduces a method which avoids nested calls to the pricing function, similar to the use of least-squares Monte Carlo (LSMC) for producing future exposures. The method algorithmically differentiates continuation values and underlying swap values with respect to model parameters. These are transformed into sensitivities over market quantities via Jacobians. An illustrative numerical example is provided for a Bermudan swaption demonstrating a massive acceleration w.r.t. brute-force calculations.

Complete the form to download this research paper, “Efficient SIMM-MVA Calculations for Callable Exotics”

About the Authors:

Dr. Alexandre Antonov, Senior Vice President of Quantitative Research, Numerix
Dr. Antonov was recently recognized with the honor of Risk Magazine’s 2016 Quant of the Year. He first began studying Physics and Mathematics at the Moscow Institute of Physics and Technology, followed by the Landau Institute for Theoretical Physics (PhD in 1997) and The Laboratory of Theoretical and High Energy Physics at the University of Paris VI. In March 1998 Alexandre he joined Numerix based in Paris taking on a number of positions during his tenure with the company including Quantitative Analyst, Senior Quantitative Analyst, Vice President and Senior Vice President. During the course of his career Dr. Antonov has had over twenty articles published in industry journals, including six that have appeared on the pages of Risk Magazine.

Dr. Serguei Issakov, Global Head of Quantitative Research, Numerix
Dr. Issakov, as Global Head of Quantitative Research, oversees the company’s quantitative research globally, including the research of pricing models at Numerix. Since joining Numerix in 1999, his earlier roles at Numerix included Vice President of Financial Applications, Head of Engine Development (the forerunner to Numerix 7) and Head of Risk Analytics.Prior to joining Numerix, Dr. Issakov held research positions in theoretical physics at the Nordic Institute for Theoretical Physics in Copenhagen, the University of Paris (Laboratory of Theoretical Physics and Statistical Models), the University of Oslo and the Center for Advanced Study in Oslo. Before that, he led research on models of brain rhythms at the Medical Radiological Center in Obninsk Russia. Dr. Issakov has published over 40 papers in mathematics and theoretical physics. He is a co-author of the Issakov-Ouvry-Wu equations in fundamental quantum statistical mechanics. He has received numerous fellowships and research grants, including a NATO Visiting Professorship and grants from the Russian Foundation for Basic Research. He holds PhD in Theoretical and Mathematical Physics from Moscow Institute of Physics and Technology, from the Theory Group led by Physics Nobel Laureate Vitaly Ginzburg.

Dr. Andrew McClelland, PhD, Director of Quantitative Research, Numerix
Andrew McClelland’s quantitative research at Numerix focuses on XVA pricing and hedging, generating counterparty credit risk metrics for structured products, and estimating risk model parameters via time-series estimation. He earned his PhD in finance at the Queensland University of Technology for a thesis on financial econometrics. He considered markets exhibiting crash feedback, option pricing for such markets, and parameter estimation for such markets using particle filtering methods. Dr. McClelland’s work has been published in the Journal of Banking and Finance, the Journal of Econometrics, and the Journal of Business and Economic Statistics.

Download Numerix Research Paper

Complete the form below to download this complimentary research paper.

Select Form: 

Form #5: Research

Keep me informed of future research from Numerix:

Sign me up to receive "Derivative Insights & Innovations" monthly newsletter by Numerix:

* Required fields
conference presentation

Efficient MVA by Backward Differentiation