High-Yield Debt Considerations
The below dashboard summarizes key performance metrics for each mezzanine tranche based on the modeled outcomes. While expected returns kα and standard deviations σα are shown, they do not fully capture the risk because lending returns are asymmetric: the upside is capped, while downside losses can be significant. To provide a clearer picture, the dashboard also displays the probabilities of each of the following outcomes by tranche:
- full repayment of principal and interest
- repayment of principal only
- partial principal recovery
- complete loss of principal
The probabilities help illustrate the distribution of potential outcomes across the capital stack.
Users can adjust the values of kα and σα to explore how changes in assumptions affect tranche-level performance.
These analyses are intended solely for academic purposes. No warranty or representation is made with regard to their accuracy.