I have searched on the Internet and in several books (including John C. Hull and Jon Gregory) for concrete examples of Potential Future Exposure (PFE), but haven't had any success so far. I would greatly appreciate it if someone can point me to a specific example of PFE calculation from scratch. I am curious to see its input data/parameters and algorithm and how these pieces fit in with each other.

Thank you!


1 Answer 1


I think PFE is covered well in Jon Gregory's book. Have a look at his website, he has spreadsheets on how PFE can be calculated. In 2nd Edition its in Chapter 8. If you happen to have the 3rd Edition its in Chapter 7.

Basically, what you need to calculate PFE is almost the same as VaR - expected value ($ \mu $), volatility ($ \sigma $), and confidence level ($ \alpha $).

Implementation example in python.

Informative presentation.


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