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 of the new algorithm is that it allows us to achieve higher accuracy in almost the same computational time. It is intended as an alternative to the much slower Fourier transform based methods \cite{MD}.
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Paper provided by EconWPA in its series Finance with number
0506015.
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