Denting the FRTB‐IMA Computational Challenge via Orthogonal Chebyshev Sliding Technique. Issue 111 (1st February 2021)

• Record Type: Journal Article
• Authors: Zenon, Mariano; Ruiz, Ignacio
• Is Part Of: Wilmott. Volume 2021:Issue 111(2021)
• Page Start: 74
• Page End: 93
• Publication Date: 2021-02-01
• Subjects: market risk -- FRTB‐IMA -- Chebyshev tensors -- risk management; Finance -- Periodicals; Financial services industry -- Periodicals; 332
• DOI: 10.1002/wilm.10907
• Languages: English
• ISSNs: 1540-6962

Abstract

Abstract : In this paper we introduce a new technique based on high‐dimensional Chebyshev Tensors that we call orthogonal Chebyshev sliding technique. We implemented this technique inside the systems of a tier‐one bank, and used it to approximate Front Office pricing functions in order to reduce the substantial computational burden associated with the capital calculation as specified by FRTB IMA. In all cases, the computational burden reductions obtained were of more than 90 percent, while keeping high degrees of accuracy. The latter obtained as a result of the mathematical properties enjoyed by Chebyshev tensors.