CLO Modelling Assumptions: Implied Portfolio Loss and Default Rates
Overall, the results suggest that EU CLOs experienced lower portfolio loss and default rates than their US BSL counterparts.
Overall, the results suggest that EU CLOs experienced lower portfolio loss and default rates than their US BSL counterparts.
Estimating long-term annual default rates and an average recovery rate is an intricate process. At CLO Research, we employ the loan index to aid in estimating the annual credit loss rate inputs required for CLO cashflow modelling. This credit loss rate incorporates factors such as prepayment, trading losses, and reinvestment.