We describe a simple Importance Sampling strategy for Monte Carlo simulations based on a least-squares optimization procedure. With several numerical examples, we show that such Least-squares Importance Sampling (LSIS) provides efficiency gains comparable to the state-of-the-art techniques, for...

A computational technique borrowed from the physical sciences is introduced to obtain accurate closed-form approximations for the transition probability of arbitrary diffusion processes. Within the path integral framework the same technique allows one to obtain remarkably good approximations of...

In this paper, we propose a novel, analytically tractable, one-factor stochastic model for the dynamics of credit default swap (CDS) spreads and their returns, which we refer to as the spread-return mean-reverting (SRMR) model. The SRMR model can be seen as a hybrid of the Black–Karasinski...

We present an accurate and easy-to-compute approximation of zero-coupon bonds and Arrow–Debreu (AD) prices for the Black–Karasinski (BK) model of interest rates or default intensities. Through this procedure, dubbed exponent expansion, AD prices are obtained as a power series in time to...