This paper uses a bottom-up, reduced form credit risk model with hazard rate estimated default probabilities to compute various collateralized loan obligation (CLO) tranches’ loss probabilities and capital factors. It is shown that with respect to the loss probabilities, credit rated CLO...

Using a large sample of collateralized loan obligation (CLO) portfolios, we examine the role of borrowers’ information quality in corporate loan securitization. We find that all else equal, CLO managers prefer loans from firms with high information quality. This effect is stronger when...