Cumulative Distribution Function of CDO Loan Portfolio Loss in the Gaussian Factor Model

Computes Cumulative Distribution Function of CDO Loan Portfolio Loss in the Gaussian Factor Model

% The code is explained in the article: Okunev, Pavel, "Fast Computation of

% the Economic Capital, the Value at Risk and the Greeks of a Loan Portfolio

% in the Gaussian Factor Model" (July 1, 2005). http://ssrn.com/abstract=758505

% This implements one factor Gaussian model.

% [pd]=pdgs(L,w,p,LL,N)

% L = exposures,as fraction of total

% portfolio, taking into account the recovery rate

% Example: loan 1 is 0.01 fraction of the total portfolio, recovery rate is

% 40% then L(1)=0.01*(1-0.4)

% w = loading factors

% p = default probabilities

% LL = loss level expressed as a fraction 99% = 0.99

% N number of names in the portfolio

% pd = probability that portfolio loss will not exceed LL

%

% Copyright by Pavel Okunev 2005

% E-mail: [e-mail]

%

% This code is provided as is. The author provides no warranty and assumes no responsibility for any

% losses due to the use of this code.

%

% You are granted permission to use this code for personal use and for

% academic research.

%

% This code may not be used for commercial purposes without explicit permission by the author.

% Permission for commercial use can be obtained by writing to [e-mail]

%

% You may make and distribute a small number of copies of this code if you

% include this copyright notice with the code.

%

% If you distribute a modified version of this code you must include the copyright notice and

% conspicuously indicate that the code was modified.

%

% Please report bugs to:

% [e-mail]

%

% This integration routine serves as an example only. We highly

% recommend that the user should replace it with his/her favorite high order

% routine.