Lesson 3 of 25 · 6 min
Why the blended number hides Calder
A third of the wealth is a fifth of the collateral, and the average has no room to say so.
Calder Growth common is $1,840,005 of the $6,032,795 pool, which is 1,840,005 ÷ 6,032,795 = 30.50 percent of market value. It is the largest row, by a whisker, ahead of Meridian. On lending value it is 644,001.75 ÷ 3,277,251.25 = 19.65 percent. The name loses almost eleven points of share in the walk from wealth to collateral.
The blend cannot report that walk. 54.32 percent is one number. It is consistent with a book of mid-equity rows, and it is equally consistent with this book: two large single names, one of them advanced at 35 percent. Track 7 lesson 7 showed two accounts blending to the same rate and responding six times differently to one event. Calder is that mechanism sitting inside one statement.
Read the 35 percent as a price of exit, not as a quality score. Track 7 lesson 1 treated concentration as a count of exits. A growth name that is already 30.50 percent of the pledged pool is one order book and one residual. The schedule withholds 65 percent of its market value for that reason. The blend then folds the withheld dollars back into a mid-fifties average, and the withholding disappears from the summary line.
Two single names together are (1,838,300 + 1,840,005) ÷ 6,032,795 = 60.97 percent of market value. More than three-fifths of the pool can move on two residual events. The 54.32 percent line has no column for that. It is a weighted average, and weighted averages destroy dispersion.
Calder is not hidden because the statement omitted it. It is hidden because the average is doing what averages do.
Key terms
- Share of market value
- A holding's market value divided by the pledged total. Calder is 30.50 percent on this basis.
- Share of lending value
- A holding's lending value divided by total lending value. Calder is 19.65 percent on this basis.
- Dispersion
- How unevenly value sits across rows. An average can be identical for two books whose dispersion is not.
Worked example
Calder on two denominators
Calder Growth common, March close. Market value $1,840,005. Advance rate 35 percent. Lending value $644,001.75. Pool market value $6,032,795. Pool lending value $3,277,251.25.
- Calder as a share of market value
- 30.50%
- Calder lending value
- $644,001.75
- Calder as a share of lending value
- 19.65%
- Share given up in the walk
- 10.85 points
- Printed blend
- 54.32%
1,840,005 ÷ 6,032,795.
1,840,005 × 0.35.
644,001.75 ÷ 3,277,251.25.
30.50 − 19.65.
Contains none of the walk.
Eleven points of concentration leave the collateral base and never appear in the 54.32 percent.
Check yourself
Calder is $1,840,005 of a $6,032,795 pool at a 35 percent advance rate. What share of market value is it, what share of lending value, and why can 54.32 percent not tell you either figure?
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.