A Fast Algorithm for Computing Expected Loan Portfolio Tranche Loss in the Gaussian Factor Model
Pavel Okunev ()
Risk and Insurance from EconWPA
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: Moody's Fourier Transform method; portfolio loss distribution; DJCDX; CDS portfolio; CDS; expected tranche loss (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpri:0506002
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