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CLO replenishment regarded as linear optimisation problem

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Abstract

Synthetic collateralised loan obligations (CLOs) often have a replenishment feature: if the securitised assets amortise, the unused CLO volume can be replenished (refilled). While this replenishment problem usually is not a linear optimisation problem, we show that under additional assumptions it can be converted into a linear optimisation problem. Thus, the replenishment problem becomes numerically tractable even for a large number of assets.

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Notes

  1. Sometimes, the term CLO is used in a narrower sense and just refers to securitisations of corporate bonds and loans.

  2. An obligor group consists of the parent company and its subsidiaries, i.e. the companies economically controlled by the parent company.

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Acknowledgements

The author would like to thank Holger Hohle for testing the algorithm described in this paper.

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Authors and Affiliations

  1. Hochschule RheinMain Studiengang Angewandte Mathematik, Kurt-Schumacher-Ring 18, 65197, Wiesbaden, Germany

    Claas Becker

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  1. Claas Becker
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Correspondence to Claas Becker.

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Becker, C. CLO replenishment regarded as linear optimisation problem. Decisions Econ Finan 40, 53–62 (2017). https://doi.org/10.1007/s10203-017-0194-8

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  • DOI: https://doi.org/10.1007/s10203-017-0194-8

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