Risk optimisation: the noise is the signal
Burnett, O’Callaghan and Hulme introduce a new method for optimising accuracy and risk's computing speed for an XVA trading book
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The make-up of bank trading books can be highly variable. At one end of the spectrum are flow books, consisting of a fairly homogeneous set of quick-to-value trades. At the other end, we have valuation adjustment books, referencing a heterogeneous set of counterparties, each with different underlying trade populations. These trades, and hence the XVAs for different
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