Banks must manage the lifetime costs of XVA, i. e. credit (CVA), funding(including funding of initial margins, FVA and MVA), capital (KVA) and tax(TVA). Management includes hedging(requiring first- and second-order sensitivities), attribution (and re-attribution), and incremental changes together with their interactions. Incremental management is required throughout the trading day for multiple portfolio changes. We show that a combination of trade-level regression and global conditioning (exploiting the linearity of conditional expectations over filtrations) radically simplifies both the computation and also the implementation of the computations . Moreover, many calculation elements are inherently parallel and suitable for GPU implementation  .
Banks must manage their trading books, not just value them. Pricing includes valuation adjustments collectively known as XVA (at least credit, funding, capital and tax), so management must also include XVA. In trading book management we focus on pricing, hedging, and allocation of prices or hedging costs to desks on an individual trade basis. We show how to combine three technical elements to radically simplify XVA management, both in terms of the calculations, and the implementation of the calculations. The three technical elements are: trade-level regression; analytic computation of sensitivities; and global conditioning. All three are required to obtain the radical efficiency gains and implementation simplification . Moreover, many of the calculations are inherently parallel and suitable for GPU implementation . The resulting methodology for XVA management is sufficiently general that we can cover pricing, first- and second-order sensitivities, and exact trade-level allocation of pricing and sensitivities within the same framework. Managing incremental changes to portfolios exactly is also radically simplified .
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the lifetime costs of XVA, i. e. credit (CVA), funding(including funding of initial margins, FVA and MVA), capital (KVA) and tax(TVA). Management includes hedging(requiring first-
their trading books, not just value them. Pricing includes valuation adjustments collectively known as XVA (at least credit, funding, capital
R
second-order sensitivities), attribution (and re-attribution), and incremental changes together with their interactions. Incremental management is required throughout the trading day for multiple portfolio changes. We show that a combination of trade-level regression and global conditioning (exploiting the linearity of conditional expectations over filtrations) radically simplifies both the computation
tax), so management must also include XVA. In trading book management we focus on pricing, hedging,
R
also the implementation of the computations
allocation of prices or hedging costs to desks on an individual trade basis. We show how to combine three technical elements to radically simplify XVA management, both in terms of the calculations, and the implementation of the calculations. The three technical elements are: trade-level regression; analytic computation of sensitivities; and global conditioning. All three are required to obtain the radical efficiency gains and implementation simplification
R
calculation elements
of the calculations
A
. The resulting methodology for XVA management is sufficiently general that we can cover pricing, first- and second-order sensitivities, and exact trade-level allocation of pricing and sensitivities within the same framework. Managing incremental changes to portfolios exactly is also radically simplified