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Dynamic sensitivities and Initial Margin via Chebyshev Tensors

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  • Mariano Zeron
  • Ignacio Ruiz

Abstract

This paper presents how to use Chebyshev Tensors to compute dynamic sensitivities of financial instruments within a Monte Carlo simulation. Dynamic sensitivities are then used to compute Dynamic Initial Margin as defined by ISDA (SIMM). The technique is benchmarked against the computation of dynamic sensitivities obtained by using pricing functions like the ones found in risk engines. We obtain high accuracy and computational gains for FX swaps and Spread Options.

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  • Mariano Zeron & Ignacio Ruiz, 2020. "Dynamic sensitivities and Initial Margin via Chebyshev Tensors," Papers 2011.04544, arXiv.org.
    • Handle: RePEc:arx:papers:2011.04544
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    References listed on IDEAS

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    1. Kathrin Glau & Ricardo Pachon & Christian Potz, 2019. "Fast Calculation of Credit Exposures for Barrier and Bermudan options using Chebyshev interpolation," Papers 1905.00238, arXiv.org.
    2. Kathrin Glau & Daniel Kressner & Francesco Statti, 2019. "Low-rank tensor approximation for Chebyshev interpolation in parametric option pricing," Papers 1902.04367, arXiv.org.
    3. Mariano Zeron Medina Laris & Ignacio Ruiz, 2018. "Chebyshev Methods for Ultra-efficient Risk Calculations," Papers 1805.00898, arXiv.org.
    4. Maximilian Gaß & Kathrin Glau & Mirco Mahlstedt & Maximilian Mair, 2018. "Chebyshev interpolation for parametric option pricing," Finance and Stochastics, Springer, vol. 22(3), pages 701-731, July.
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