This note presents a simple, robust and computationally efficient way to calculate expectations of arbitrary future payoffs within the context of a Monte Carlo forward-induction methodology. The technique complements existing approximation techniques: while virtually all existing approximation...

The modelling of default risk in debt securities involves making assumptions about the stochastic process driv- ing default, the process generating the write-down in default, and risk-free interest rates. Three generic approaches have been used. The first relies on modelling the value of the...