Long-Term Portfolio Simulation - For XVA, Limits, Liquidity and Regulatory Capital

Date: Saturday, October 25, 2014 , Categories: Business, Economics and Finances

The changes in financial markets and regulatory environment following the financial crisis created many new analytics requirements.

These requirements include those for computing CVA. In addition, advanced limit management based on potential future exposure (PFE) has taken an increased role following the crisis.

Calculation of PFE-based limits also requires simulation of portfolio to maturity in either risk neutral or real measure. Other important requirements include modelling funding (FVA), collateral needs and cheapest to deliver collateral, and projection of portfolio cashflows for liquidity management.