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We propose a fast algorithm for computing the expected tranche loss in the Gaussian factor model with arbitrary accuracy using Hermite expansions. No assumptions about homogeneity of the portfolio are made. The algorithm is a generalization of the algorithm proposed in \cite{PO}. The advantage...
Persistent link: https://www.econbiz.de/10005413080
We propose a fast algorithm for computing the expected tranche loss in the Gaussian factor model. We test it on a 125 name portfolio with a single factor Gaussian model and show that the algorithm gives accurate results. We choose a 125 name portfolio for our tests because this is the size of...
Persistent link: https://www.econbiz.de/10005126106