This paper presents a computationally efficient technique for the computation of exposure distributions at any future time under the risk-neutral and some observed real-world probability measures, needed for computation of credit valuation adjustment (CVA) and potential future exposure (PFE). In...

The regulatory credit value adjustment (CVA) for an outstanding over-the-counter (OTC) derivative portfolio, is computed based on the portfolio exposure over its lifetime. Usually the future portfolio exposure is approximated using Monte Carlo simulation, as the portfolio value can be driven by...

This paper describes an American Monte Carlo approach for obtaining fast and accurate exercise policies for pricing of callable LIBOR Exotics (e.g., Bermudan swaptions) in the LIBOR market model using the Stochastic Grid Bundling Method (SGBM). SGBM is a bundling and regression based Monte Carlo...

This paper considers the problem of pricing options with early-exercise features whose pay-off depends on several sources of uncertainty. We propose a stochastic grid method for estimating the optimal exercise policy and using this policy to obtain a low-biased estimator for high-dimensional...

This paper describes a practical simulation-based algorithm, which we call the <I>Stochastic Grid Bundling Method </I> (SGBM) for pricing multi-dimensional Bermudan (i.e. discretely exercisable) options. The method generates a direct estimator of the option price, an optimal early-exercise policy as...</i>

In this paper we extend the stochastic grid bundling method (SGBM), a regress-later based Monte Carlo scheme for pricing early-exercise options, with an adjoint method to compute in a highly efficient manner sensitivities along the paths, with reasonable accuracy. With the ISDA standard initial...