What is the typical AAA CLO tranche attachment point?

Post-crisis CLO AAA tranches typically have credit enhancement of 35–40% (subordination), meaning 35–40% of the underlying loan pool must default before AAA receives principal losses. Historically, no CLO AAA tranche has defaulted in the US market.

How does OC (overcollateralization) test protect senior CLO tranches?

CLO indentures include OC and interest coverage (IC) tests. If portfolio losses cause OC to breach a trigger, cash flows divert from junior tranches to pay down senior tranches, protecting them. OC tests are the primary mechanism for dynamic credit enhancement in CLOs.

CLO Attachment and Detachment Points

Define CLO tranche attachment and detachment points expressing the subordination level: AAA tranches attach at the top with high detachment points; equity tranche has no attachment protection.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Define CLO tranche attachment and detachment points expressing the subordination level: AAA tranches attach at the top with high detachment points; equity tranche has no attachment protection. Use the clo tranche points result to inform your calculation.

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