Lesson 15 of 25 · 6 min
The trigger as a price on Meridian
The same subtraction on a different row produces another impossible price, for the same structural reason.
Repeat the conversion on Meridian Industrial common. Meridian's March value is $1,838,300. The residual book is $6,032,795 − $1,838,300 = $4,194,495. The trigger is still $2,655,090.67. Meridian's implied value is $2,655,090.67 − $4,194,495 = −$1,539,404.33. Per share, on 12,400 shares, that is −$124.15. The sign has not changed.
Meridian at zero leaves a book of $4,194,495 and an LTV of $1,858,563.47 ÷ $4,194,495 = 44.31 percent. The residual is $1,539,404.33 above the trigger — $1,705.00 more residual than in the Calder conversion, because Meridian is $1,705.00 smaller than Calder. The structure is identical: four other rows already clear the test, so the fifth cannot un-clear it by falling.
Doing the conversion twice is not repetition for its own sake. It shows that the impossibility is a property of the residual, not a property of Calder. Any one of the five names, held as the variable with the other four flat, produces a negative implied last sale on this statement. The blended conversion in the next lesson is the first one that returns a number inside the domain of prices.
A single-name implied price tests one residual. On this book every residual is larger than the trigger, so every single-name implied price is negative.
Key terms
- Row-by-row implied price
- The single-name conversion repeated on each pledged name. On this sample every row returns a negative.
- Structural residual
- A residual book that exceeds the trigger before the variable row contributes. The sign of the implied price follows from that comparison alone.
Worked example
Meridian solved for the March trigger, others held flat
Trigger $2,655,090.67, Meridian units 12,400, Meridian March value $1,838,300, book $6,032,795.
- Residual book
- $4,194,495
- Meridian value that meets the trigger
- −$1,539,404.33
- Implied last sale
- −$124.15
- Book if Meridian is worth zero
- $4,194,495
- LTV if Meridian is worth zero
- 44.31%
$6,032,795 − $1,838,300.
$2,655,090.67 − $4,194,495.
−$1,539,404.33 ÷ 12,400.
Meridian's implied last sale is also negative. The impossibility is the residual, not the name.
Check yourself
Holding the other four March rows flat, what Meridian last sale makes the book equal $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.