A Fast Algorithm for Computing Expected Loan Portfolio Tranche Loss in the Gaussian Factor Model
Numerical Analysis
2008-12-10 v2 Statistics Theory
Computational Finance
Statistics Theory
Abstract
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 the standard DJCDX.NA.HY portfolio. The algorithm proposed here is intended as an alternative to the much slower Moody's FT method.
Keywords
Cite
@article{arxiv.math/0506125,
title = {A Fast Algorithm for Computing Expected Loan Portfolio Tranche Loss in the Gaussian Factor Model},
author = {Pavel Okunev},
journal= {arXiv preprint arXiv:math/0506125},
year = {2008}
}