Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Everything You Always Wanted to Know About XVA Model Risk but Were
  Afraid to Ask   Valuation adjustments, collectively named XVA, play an important role in
modern derivatives pricing. XVA are an exotic pricing component since they
require the forward simulation of multiple risk factors in order to compute the
portfolio exposure including collateral, leading to a significant model risk
and computational effort, even in case of plain vanilla trades. This work
analyses the most critical model risk factors, meant as those to which XVA are
most sensitive, finding an acceptable compromise between accuracy and
performance. This task has been conducted in a complete context including a
market standard multi-curve G2++ model calibrated on real market data, both
Variation Margin and ISDA-SIMM dynamic Initial Margin, different
collateralization schemes, and the most common linear and non-linear interest
rates derivatives. Moreover, we considered an alternative analytical approach
for XVA in case of uncollateralized Swaps. We show that a crucial element is
the construction of a parsimonious time grid capable of capturing all
periodical spikes arising in collateralized exposure during the Margin Period
of Risk. To this end, we propose a workaround to efficiently capture all
spikes. Moreover, we show that there exists a parameterization which allows to
obtain accurate results in a reasonable time, which is a very important feature
for practical applications. In order to address the valuation uncertainty
linked to the existence of a range of different parameterizations, we calculate
the Model Risk AVA (Additional Valuation Adjustment) for XVA according to the
provisions of the EU Prudent Valuation regulation. Finally, this work can serve
as an handbook containing step-by-step instructions for the implementation of a
complete, realistic and robust modelling framework of collateralized exposure
and XVA.

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The categories of this paper are: supr-con
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The categories of this paper are: patt-sol
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The categories of this paper are: hep-ex
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The categories of this paper are: q-bio
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The categories of this paper are: cond-mat
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The categories of this paper are: chao-dyn
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The categories of this paper are: nlin
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The categories of this paper are: dg-ga
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The categories of this paper are: math
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The categories of this paper are: atom-ph
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The categories of this paper are: plasm-ph
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The categories of this paper are: math-ph
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The categories of this paper are: funct-an
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The categories of this paper are: comp-gas
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The categories of this paper are: chem-ph
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The categories of this paper are: astro-ph