Potential Future Exposure (PFE) of Swap under Vasicek model by Monte Carlo Method

Posted by Fred

Show inputs of the numerical Method

Number of time partitions per year
Simulation times
Input:
Risk free rate (r)%
Mean reversion
Equilibrium
volatility (sigma)
Swap rate %
Tenor of swap year
Time for evaluate EE year
Level of confidence bps
Number of premiums per year
Notional amountm
Output:
PFE of Swap m

The calculation is based on Vasicek model (dr=a(b-r)dt+sigma*dw). By using Monte Carlo method we can calculate the value of the swap contract at given time, and then calculate the PFE.

Tagged: Vasicek model, Credit Risk, Interest Rate Swap Calculator and Expected Exposure

 •  Sep 28, 2013  • 

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