We present a general and flexible numerical procedure for pricing European interest-rate derivatives within multifactor affine term structure models by means of piecewise multilinear interpolations. Our procedure relies to the maximum extent on the true density of the state process and solves...

Although the Basel Committee has identified recovery risk as an important source of risk in relation to default, the impact of recovery rates on defaultable securities is not yet well understood. This paper proposes a discrete-time reduced form approach for pricing defaultable securities that...