Expected Positive Exposure (EPE) - Meaning

23Nov, 23

Expected Positive Exposure (EPE) - Meaning

The expected positive net value of a portfolio as a function of time after collateral (i.e., initial and variation margin applied with netting and haircut rules) has been taken into account.When a portfolio is simulated over thousands of paths, EPE for a fixed time is calculated as (sum of Theoretical Values (TVs) on paths where TV > 0)/(total number of paths), much like expected exposure (EE) but restricted to paths of positive TV.