Concentration: Calder as a share of market versus of lending value

Concentration is a share. The share depends on the denominator, and the March book has two. Against market value, Calder is 30.50 percent. Against lending value, Calder is 19.65 percent. The same holding is a concentrated third of the wealth and a diversified-looking fifth of the collateral.

A concentration limit is written against one of those denominators, and the choice changes whether the limit binds. A 25 percent single-name cap measured on market value has already been crossed: 30.50 is above 25. The same cap measured on lending value has not: 19.65 is below 25. Lesson 20 takes the binding case. The point here is that both percentages are correct, and they answer different questions.

Market-value share answers how much of the pledged wealth one residual can move. Lending-value share answers how much of the recognised collateral that residual currently supplies. The first is about the event; the second is about the buffer the event would remove. Because the advance rate is already lower on the concentrated name, the buffer share is the smaller number. That is the discount doing its job, and it is also the discount making the book look less concentrated after the job is done.

Meridian plus Calder is the pair version of the same split. Together they are 60.97 percent of market value and (919,150 + 644,001.75) ÷ 3,277,251.25 = 47.70 percent of lending value. Two residuals still dominate the wealth. After haircuts they no longer dominate the collateral print, which is why a blend of 54.32 percent and a Calder lending share of 19.65 percent can coexist with a book that is, on wealth, a two-name pledge.

A schedule that discounts concentration will, by construction, report less concentration on the discounted base. That is not a second measurement. It is the first one, after the cut.