Abstracts

Credit Valuation Adjustment (CVA) and Potential Future Exposure (PFE) have arisen special interest in the risk management of the financial industry since the credit crisis in year 2008. Both quantities depend on the exposure distributions along the time horizon. We are interested in the exposure values of Bermudan options. Two efficient methods are present for the computation of the exposure profiles: one is a combination of the COS method and Monte Carlo simulation, while the other is an extension of the stochastic-grid-bundling-method (SGBM). Both methods are based on a simulated stochastic grid. The results are studied when the underlying asset follows the Black Scholes and the Heston' model, and we compare the difference under these two models to see the impact of stochastic volatility.