2 Layers of Debt (Circular Reference Modeling Question)

mrfcflanker's picture
Rank: Baboon | 138

Have a fairly intricate model with plenty of moving parts already. Set a senior and subordinate loan to calculate as LTCs of a total capitalization which inherently accounts for their interest reserves.

The model calculates well enough when I set iterations to i.e. 200 - but is there are way to make it operate faster without changing the iteration count?

would like to hear some opinions

Comments (9)

Apr 4, 2018

Interested as well

Apr 4, 2018

don't run iterative calculations, but instead include a buffer in the rate. Iterative calcs are cumbersome and provide a sense of false accuracy.

Apr 4, 2018

Can't the same be said about static calcs? If the loan sizing for one of the debt tranches becomes static, it won't gauge the interest properly.

Can you give an example of the buffer?

Apr 4, 2018

In other words, run the model/waterfall one step forward i.e. calculate the interest off of the prior periods balance. Regarding the buffer, run a market rate + 50bps

Apr 4, 2018

Can you post the (abbreviated) spreadsheet?

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Best Response
Apr 4, 2018

Bump. would be interested in this too. I delay the calcs one period or start with BOP balance and i still usually need 200 iterations to to accommodate mezz construction. Heck just a construction whole loan I usually need iterative calcs

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Apr 4, 2018

it works fine at 200 (max 2 refreshes) just annoying when you have a lot to crunch

Apr 5, 2018

ahhh, my apologies, forgot to mention my our model has a facility size and expected loan-to-cost...nevermind

Apr 26, 2018
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