We describe a unified numerical model which allows fast and accurate simulation of nonlinear light propagation in nanoparticle composites, including various effects such as group velocity dispersion, second-and third-order nonlinearity, quasi-free-carrier formation and plasma contribution, exciton dynamics, scattering and so on. A developed software package SOLPIC is made available for the community. Using this model, we analyze and optimize efficient generation of THz radiation by two-color pulses in ZnO/fused silica composite, predicting an efficiency of 3%. We compare the role of various nonlinear effects contributing to the frequency conversion, and show that optimum conditions of THz generation differ from those expected intuitively.