Bloomberg CLO Cash Flows: Transaction Waterfalls and Scenario Inputs

Summary

The document asks whether Bloomberg’s cash flow generator for newly issued collateralized loan obligations is suitable for discounted cash flow valuation. The responses describe the tool as translating the cash flow waterfall documented in a CLO’s transaction documents, using user-provided assumptions such as prepayment, default, loss severity, and recovery timing. This account presents it as a scenario-driven cash flow calculation rather than an independently developed pricing methodology.

One contributor reports obtaining results similar to Bloomberg with an Excel model based on a published cash flow modeling reference. Another says Moody’s Analytics cash flows are nearly the same because both draw on the same transaction documents. These are brief user reports, not a documented validation study. The material does not explain the generator’s full mechanics, establish valuation accuracy, or show how sensitive results are to assumptions, so its suitability for DCF valuation remains unresolved.

Key ideas

• The described Bloomberg tool generates CLO cash flows from transaction waterfall terms and user inputs.
• Relevant scenario inputs include prepayment, default, loss severity, and recovery timing assumptions.
• One contributor reports similar outputs from an Excel-based model.
• Another contributor reports near agreement with a Moody’s Analytics cash flow tool.
• The anecdotes do not establish model accuracy or determine whether the generator is sufficient for valuation.

Tags

# Appropriateness of the Bloomberg CLO Cashflow Generator


# Appropriateness of the Bloomberg CLO Cashflow Generator












Since CLOs seem to gain in popularity because of the COVID-19 crisis, I came across the possibility in Bloomberg to generate cashflows for newly issued CLOs through the function "weighted average life graph", where you just have to input several parameters (Default Rate, Prepayment Rate etc.) and Bloomberg generates them automatically.

I was wondering, if anyone uses this generator for valuation of CLOs in a DCF world (i.e. if this generator is appropriate because the model behind is a well known pricing model)

Kind regards

## Answer by T123 (score 1)

https://quant.stackexchange.com/a/67772

We priced CLO similar to Bbg based on excel sheets and obtained very similar numbers as Bbg. We used https://www.amazon.com/Cash-CDO-Modelling-Excel-Approach-ebook/dp/B006L8ERUE as reference. Hope it helps

## Answer by simzoor (score 0)

https://quant.stackexchange.com/a/59853

I've collected some information about this and this is my knowledge up today:

Bloomberg does NOT use an own model (in the sense of a developed methodology), but only the translation of the cashflow waterfall documented in the CLO transaction, for which it uses the predefined input parameters by the Bloomberg user (CPR, CDR, LGD, Recovery Lag).

I was also told that the Cashflows from the Moody's Analytics Structured Finance Portal are almost the same, since both use the same CLO transaction documents.

If you have any further or contrary information on this, please add and/or correct me.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.