Lesson 12 of 25 · 6 min

Combining the three into a weekly reconstruction

A published rate, five public prints, and last month's schedule rebuild seven days the letter has not covered.

The three movers now sit in one week. Accrue seven days at the last published rate. Rebuild the book from five last sales and last known units. Apply last month's advance rates, knowing they may be stale. On the week of 1–7 April the rate is still 7.22 percent, so the balance is $1,858,563.47 + $2,609.22 = $1,861,172.69 and the trigger is $2,658,818.13.

Give the five names awkward mid-week last sales: Meridian $147.90, Calder $590.20, Collective $215.40, Oakridge $62.75, government fund $51.02. The book is 12,400 × $147.90 + 3,100 × $590.20 + 4,150 × $215.40 + 8,200 × $62.75 + 18,600 × $51.02 = $1,833,960 + $1,829,620 + $893,910 + $514,550 + $948,972 = $6,021,012. Headroom is $6,021,012 − $2,658,818.13 = $3,362,193.87, or 55.84 percent. Market LTV is $1,861,172.69 ÷ $6,021,012 = 30.91 percent.

None of those figures will appear on a letter dated early May. They are a reconstruction of a week the letter will later collapse into a month-end snapshot. The known error in the snapshot is any silent haircut, any mark-versus-print gap, and any unit change. The known content is seven days of interest and five multiplications.

A weekly reconstruction is last week's rate, last week's prints, and last month's schedule. Two of those three are observations. The schedule is an assumption.

Key terms

Weekly reconstruction: Accrued balance, public book, and last printed haircuts, formed at a week-end rather than at a statement date.
Collapsed snapshot: The month-end letter, which replaces a path of daily books and daily increments with one closing row.

Worked example

The week of 1–7 April, invented last sales

Start from the March close. Rate 7.22 percent Act/360. Units and advance rates held at March. Last sales $147.90, $590.20, $215.40, $62.75, $51.02.

Accrued balance: $1,861,172.69
Trigger: $2,658,818.13
Rebuilt book: $6,021,012
Headroom: 55.84%
Market LTV: 30.91%

Seven days and five prints produce a headroom the May letter will never itemise as a week. The week still has an arithmetic.

Check yourself

After seven April days at 7.22 percent Act/360 the balance is $1,861,172.69. The rebuilt book is $6,021,012. What is the reconstructed headroom percentage?

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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.