Lesson 4 of 25 · 6 min

A price you can see and a lending value you cannot

The screen prints a last sale; the lending value is a haircut the next letter has not yet applied.

Calder Growth common closed March at $593.55. Three thousand one hundred shares make $1,840,005 of market value, a multiplication you can finish from a public print and a unit count. The lending value on that row is $644,001.75, which is $1,840,005 × 0.35. The 0.35 is not on the tape. It is on last month's schedule.

Those two numbers are different kinds of information. A last sale is an observed print. A lending value is that print after a haircut the lender chose and may revise. Track 1 lesson 6 showed the same loan reading two different LTVs depending on whether the denominator is market value or lending value. Between statements you can refresh the first denominator from the tape. You cannot refresh the second without assuming the last haircut still applies.

On this facility the maintenance test is written against market value, so the trigger of $2,655,090.67 does not use the haircut at all. The lending-value column still matters for any test that is written against it, and for the blended advance of 54.32 percent. Both of those wait on a rate the screen does not show. Holding last month's 0.35 against today's Calder print is a reconstruction, not a confirmation.

A price is public. A lending value is a private product of that price and a schedule. Only one of those updates when the tape updates.

Key terms

Public print: A last sale you can observe without a letter. Multiplied by units, it is the market-value row.
Lending value: Market value multiplied by the advance rate the lender last assigned to that row. Invisible until the schedule is known, and stale if the schedule has moved.
Haircut: The complement of the advance rate. Calder at 0.35 is a 65 percent haircut; the tape does not print it.

Worked example

One Calder print, two columns

3,100 shares, last sale $593.55, last printed advance rate 0.35. Illustrative, not a quote.

Market value: $1,840,005
Lending value at 0.35: $644,001.75
What a new last sale of $588.40 updates immediately: Market value $1,824,040
What that same print does not confirm: The 0.35 still applying

The tape refreshes one column. The other column is last month's haircut until a letter says otherwise.

Check yourself

Calder prints $588.40. Units are still 3,100. Which figure is determined by the print alone?

Lending value
Blended advance rate for the whole book
Market value of $1,824,040
The maintenance trigger

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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.