37 wo fhtihceh Ct hL eO tdr ae na lc ho ef wi shai cpha trht ;ectarpaint ac hl ae l li os caapt iaornt ; orfatthi negt rdai ns ccrheep; at nr acny,c ihf ea nv ay,l ubee;t wv ael eune Moody’s and S&P, per tranche; and, finally, the year of issuance of the tranche. Invariably a CLO deal is made up of a number of tranches. Tranche Count equals the total number of tranches in a corresponding CLO deal. In our total sample, the tranche count 16 per CLO deal ranges from 1 to 23 with acomnsetarnucotft7h.e6 for the US market sample and 6.7 for the EU market sample. We Capital Allocation measure per tranche as the percent of protection fi nr oomu rl ossasme sp lf eo ri se 2a c3h%t ri anntchheeUi nS mt haerckaept iat anlds2t r5u%c t ui nr et .hTe hEeUmme aa rnkceat p. Ti thailsailnl odci ac at itoens the percent of cushioning in the capital structure of a CLO deal, against credit losses that a specific tranche could suffer. The cushioning is provided by other tBrlaonocmh eb se ri gn tdhoee ss anmoet Cr eLaOd di l ye arl etphoa rt ta vr ea lsuuebs ofrodri ncaatpeidt atloatlhl oec tartai onnc haenidn tqhueersetfioorne. wcaelchualadtitoon cwalacsulacotendituscvteadluefofroreaecahchtrtarannchcheeomn aanudaelalyl.-bTyh-idseraal thbearsisla. borious Capital allocation aligns with credit ratings in those tranches with higher levels of shui gbhoerrd icnr ae tdei dt r ca at ipni gt a, ls oc ue svhe ino nt hi no gu gthh ewme laagbaei lntsht e ctrreadni ct hleoss sbeys c ur es du iat l lrya tri ne cge, itvhee i ar credit rating also reflects the subordination structure of cash flows in the entire deal of which the tranche is a part. Wfaceefvuarltuheerofcaontrtaronlchfoerattriasnscuhaencseiz(e, measured as the natural logarithm of the Log Tranche Size). The mean size of tranches ims seuaend t irna nt hc he eU sSi zme aor kf e$t2i5s 0$ 9m8i lml i oi lnl i. oTnh. iFso rd itfhf eer Ee nUc me ai sr kseutb, swt aenot bi asle, ravneda ohni lgyh ei nr pUaSr mt da ur ke e ttot ht ha ne rien bt he ienEg U, ams amr ek ne tt :i odneeadl s ai nb ot vhee, EoUn wa veerrea og ne amvoe rr ea gter a3n9c. h2 e%s li anr gt he er 16 We excluded one outlier with 29 tranches in one deal. Chapter 2 - How much do Investors Rely on Credit Ratings
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