Before revision:  This paper presents a computationally efficient method of calculating IM costs for any derivative portfolio: Longstaff-Schwartz Augmented Compression , (LSAC) . Essentially, Longstaff-Schwartz is used with an augmented state space to retain accuracy for VAR-relevant changes to the state variables. This method allows rapid calculation of IM costs both for portfolios, and on an incremental basis. LSAC can be applied wherever historic simulation VAR is required such as lifetime cost of market risk regulatory capital using internal models. We present example costs for IM under BCBS-261 for interest rate swap portfolios of up to 10000 swaps and 30 year maturity showing significant IM FVA costs and two orders of magnitude speedup compared to direct calculation .
After revision:  This paper presents a computationally efficient method of calculating IM costs for any derivative portfolio: Longstaff-Schwartz Augmented Compression , (LSAC) .