@ persistentone the point I have been exactly making for a while...

@ persistentone the point I have been exactly making for a while is that one needs to focus on the cash returns compared to the initial investment price paid. If you look through some previous threads on CLH you will find my dcf estimates that use exactly this information having calculated return multiples over time on a vintage basis to use in estimating future cash receipts... I have also posted graphs previously of those return multiples for historical vintages over time.

In terms of the post you are referring to above.... this relates to how amortised cost is calculated. Amortised cost is the accounting policy that CLH and CCP use for their PDLs (different for PNC) this is a method of exactly discounting estimated cashflows over the life of the instrument back to the original purchase price to determine an effective interest rate with which to earn revenue over the life of the debt tranche. Changes in actual cash flows and estimates as time go on are built into this and effectively adjust the amount recognised in the P&L in any period. This is not refering to a dcf but as noted the required accounting treatment when applying amortised cost..... The 45% comes from exactly discounting the estimated cash flows over time to the initial purchase price. If you put the purchase price and cash flows in, the provide discount formulas to discount the cash flows in each time period and then set the end value to zero by goal seeking you will arrive at the 45%. Obviously different initial estimates of future cash flows and their timing alters this effective interest rate and thus the rate at which revenue is earned. However, over time, as noted, the actual cash receipts and changes in future cash flows informed by past performance will be fed into this model and adjust earnings. I would suggest that CCP front loads the cost and thus effectively defers some earnings till later (higher amortisation rate) and vice versa for CLH. Whether CLH is too aggressive or not I'll leave to each to determine for themselves.

DYOR