Valuation of a loan with margin call features

Hello everyone,

I am currently trying to assign value to loans that are somewhat "avant-garde." They are secured loans with the underlying collateral being a stock, or other assets that have capital gains. Eventually, the loans will be securitized by an investment bank, so I want to match how the investment banking world would value these loans.

The loan servicing is automated, and a margin call for more collateral is triggered at a certain LTV (if the collateral price drops). If the LTV gets high enough, the underlying collateral is automatically liquidated to bring the loan's LTV down to the maintenance margin. Alternatively, the borrower could post more collateral to bring down the LTV to the maintenance margin.

I'm guessing this could be valued similar to margin account on a brokerage with a balance, although I think of margin accounts as revolving lines of credit and these are IO and P&I loans. Like most fixed income assets, I want to value these loans compared to par.

My current thoughts are that they loans will always be priced to par. With the margin call and liquidation process being automated, I don't see how the discounted cash flows will ever be less than the par value. Even delinquent payments trigger liquidation to cover the payment. The system seems well designed to mitigate any credit risks, counterparty risks, or any risks I can really think of. (Am I missing something?)

How would the investment banking world value these loans? Is there somewhere I could read more on what my options are here?

Please feel free to ask questions, I would really appreciate your thoughts.

1 Comments
 

Optio deleniti architecto libero voluptatem doloremque vel. Ducimus alias nulla voluptatem aliquid quo facere. Eum magni nisi commodi in eius et consequatur. Ratione quis quae quia sit libero recusandae.

Facilis ut molestiae et et deserunt sed. Praesentium eum dolore ad quam similique libero. Quo quo id fuga eos. Id blanditiis non rerum cum. Non tenetur et eum maxime dicta velit. Labore voluptatum voluptatem sed excepturi neque.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

June 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.8%
  • JPMorgan 01 98.3%
  • Guggenheim Partners 01 97.7%
  • Morgan Stanley 07 97.1%

Overall Employee Satisfaction

June 2026 Investment Banking

  • Moelis & Company No 99.4%
  • Morgan Stanley 02 98.8%
  • Evercore 01 98.3%
  • BMO Capital Markets 12 97.7%
  • Banco Santander 01 97.1%

Professional Growth Opportunities

June 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.8%
  • Morgan Stanley 05 98.3%
  • JPMorgan No 97.7%
  • BMO Capital Markets 12 97.1%

Total Avg Compensation

June 2026 Investment Banking

  • Vice President (14) $434
  • Associates (44) $258
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (22) $179
  • Intern/Summer Associate (13) $156
  • 1st Year Analyst (78) $151
  • Intern/Summer Analyst (72) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
kanon's picture
kanon
99.0
5
Betsy Massar's picture
Betsy Massar
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
DrApeman's picture
DrApeman
98.9
10
Linda Abraham's picture
Linda Abraham
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”