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Why Use a Tranche Thickness Loss Multiple?


In relation to a tranche and tranche thickness, a TTLM (tranche thickness loss multiple) is the loss coverage multiple defined by dividing the tranche thickness as a percentage by a base-case loss expectation (on a base-case approach) for the underlying collateral pool. The tranche thickness (TT) percentage constitutes the ratio of a respective class size to collateral balance. Tranche thickness loss multiple (TTLM) is a metric used to identify the depth (thickness) of a tranche, or layer, in a securitized capital structure. A higher TTLM value indicates that an issuer has retained more equity, leading to a higher senior position within the structure, and vice versa.

TTLM helps to determine the seniority of various tranches within the structure. It is used by banks and financial institutions to assess the risk associated with various tranches in a securitized structure, and as such, to measure their exposure at different levels as well as develop income-generating products while curbing the level of tranche-specific and overall risks.



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