Lesson 19 of 25 · 5 min
A position worth 1,840,005 that halves
Halving Calder removes $920,002.50 from the book and still leaves $2,457,701.83 of headroom.
Calder is worth $1,840,005 on the March close. Halving the name is a 50 percent single-name stress: new market value $920,002.50, new price $296.775, new lending value $322,000.88. The other four rows stay at $4,192,790 of market value and $2,633,249.50 of lending value.
The book's new market value is $4,192,790 + $920,002.50 = $5,112,792.50. Lending value is $2,633,249.50 + $322,000.88 = $2,955,250.38. Market LTV is $1,858,563.47 ÷ $5,112,792.50 = 36.35 percent. Headroom is $5,112,792.50 − $2,655,090.67 = $2,457,701.83, or 48.07 percent of the halved book.
Calder's share of the book falls from $1,840,005 ÷ $6,032,795 = 30.50 percent to $920,002.50 ÷ $5,112,792.50 = 17.99 percent. The blend rises, for the same reason it rose in the 37 percent lesson: the cheapest collateral shrank. New blend: $2,955,250.38 ÷ $5,112,792.50 = 57.80 percent, against March's 54.32 percent.
Halving the concentrated name is a more violent single-name story than the 37 percent lesson and a milder facility story than the 19 percent uniform move. The 19 percent book was worth $4,886,563.95. This book is worth $5,112,792.50. One name, cut in half, still leaves more collateral than a shallower cut applied to every row. The shortfall is still $0: $5,112,792.50 sits $2,457,701.83 above the trigger.
Key terms
- Halving
- A 50 percent single-name stress. On Calder it takes $1,840,005 to $920,002.50 and the book to $5,112,792.50.
- Share of the book
- A row's market value divided by the sum. Halving Calder drops its share from 30.50 percent to 17.99 percent.
- Single-name versus uniform
- A comparison of a deep move on one row with a shallower move on every row. The facility ranks them by the sum, not by the headline.
Worked example
Calder at half, four rows still
Calder multiplied by 0.50. Other four rows at March prices. Trigger $2,655,090.67.
- Calder after the half
- $920,002.50
- Book market value
- $5,112,792.50
- Book lending value
- $2,955,250.38
- Market LTV
- 36.35%
- Headroom
- $2,457,701.83
- Calder's leftover share
- 17.99%
$4,192,790 + $920,002.50.
48.07 percent of the new book.
Half a concentrated name is a large story on the row and a passing test on the facility. The sum still clears the trigger by more than two million dollars.
Check yourself
Calder halves from $1,840,005 to $920,002.50 and the other four rows stay at $4,192,790. What is the new market value of the book, and what is dollar headroom against a trigger of $2,655,090.67?
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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.