In a floating rate bond with variable interest rates going forward, we need to calculate an Expected Exposure by weighting the probability of that node’s PV (0.5^1, 0.5^3, 0.5^3, 0.5^1 for Time 3 for example, in addition to the probabilistic weighting of the coupons at that Time).
The next image, it shows an expected exposure at Time 4 ---- How was this derived? Can’t seem to find info on it in MM review videos
Is it just the probabilistic weighting of the values at Time 4 without any addition of weighted coupons? Need a confirmation thanks