Lesson 5 of 25 · 6 min

Building a running LTV from public prices and last month's schedule

Five row products and a carried-forward schedule produce a ratio the next letter has not printed.

A running LTV is a ratio you form between letters. The numerator is the last known balance plus interest accrued since that balance. The denominator is today's public market value, built from last known units and today's last sales. On the morning after March, with prices unchanged, that ratio is $1,858,563.47 ÷ $6,032,795 = 30.81 percent — the same market LTV the sample prints.

A running lending-value LTV is the same numerator over a reconstructed lending value: each public market-value row multiplied by last month's advance rate. Calder at $1,840,005 × 0.35, Meridian at $1,838,300 × 0.50, and the other three rows the same way, summing to $3,277,251.25. The ratio is $1,858,563.47 ÷ $3,277,251.25 = 56.71 percent. That is the March lending LTV, reproduced from the schedule rather than read off a summary line.

The method does not become a different method when a price moves. Replace Calder's last sale and repeat the five multiplications. The error in the method — the ways it diverges from the letter you will eventually receive — is the next lesson. This one is only the construction: public prices, last units, last haircuts, accrued balance, one division.

running LTV = (B + I) ÷ Σ (uᵢ × pᵢ)

B: Last known closing balance.
I: Interest accrued since that close, at the last known rate and day-count.
uᵢ: Last known units of row i.
pᵢ: Today's public last sale of row i.

Key terms

Running LTV: Balance plus accrued interest, divided by a book rebuilt from public last sales and last known units.
Running lending-value LTV: The same numerator, divided by the rebuilt book after last month's advance rates are applied row by row.

Worked example

Reproducing the March market LTV from the rows

Closing balance $1,858,563.47, five March last sales, units unchanged, no extra accrued interest because the close is the as-of.

Meridian market value: $1,838,300
Calder market value: $1,840,005
Other three rows: $2,354,490
Book: $6,032,795
Running market LTV: 30.81%

The printed 30.81 percent is the same division performed on the rows. A running LTV is that division performed on a later day with later prints.

Check yourself

You hold March units and March advance rates. Today's five last sales are the March last sales. Accrued interest since the close is zero. What is the running market LTV?

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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.