Compliance Testing¶

What is Compliance Testing?¶

Compliance testing ensures that Collateralized Loan Obligation (CLO) portfolios meet the contractual requirements specified in their indenture documents. These tests verify that concentration limits, coverage ratios, and quality metrics remain within acceptable thresholds.

For CLO managers, compliance testing is not optional - it is a daily operational requirement that directly impacts:

• Trustee reporting - Monthly and quarterly reports require documented test results
• Trading decisions - Every trade must be evaluated for compliance impact
• Regulatory obligations - Rating agencies and regulators require ongoing compliance verification
• Investor confidence - LPs expect proactive compliance monitoring

The Problem: Manual Testing in Excel¶

Before CalcBridge, compliance testing typically looked like this:

1. Open the master Excel workbook (often 50+ MB)
2. Update loan data from multiple sources
3. Wait for Excel to recalculate (5-15 minutes)
4. Manually check each compliance test result
5. Calculate cushions and identify warnings
6. Copy results to a Word document
7. Format for trustee submission
8. Repeat for each deal in your portfolio

Total time per deal: 2-4 hours
Total time for 10 deals: 20-40 hours per reporting cycle

The Solution: Automated Compliance Testing¶

CalcBridge transforms compliance testing from a multi-hour manual process into an automated workflow:

flowchart LR
    A[Upload<br/>Workbook] --> B[Configure<br/>Thresholds]
    B --> C[Run Test<br/>Suite]
    C --> D[Review<br/>Results]
    D --> E[Generate<br/>Report]

    style C fill:#22C55E,stroke:#16A34A,color:#fff

Key Features¶

Automated Test Suites¶

Run comprehensive compliance tests with a single API call or button click:

• Concentration Tests - Single obligor limits, top N obligor limits, industry concentration
• Rating Tests - CCC/Caa bucket limits, WARF calculations
• Coverage Tests - Overcollateralization (OC), Interest Coverage (IC)
• Quality Tests - Weighted Average Spread (WAS), Weighted Average Life (WAL)
• Diversity Tests - Moody's diversity score calculations

Learn more about test suites

Threshold Monitoring¶

Configure custom thresholds for each deal and test type:

# Example threshold configuration
{
    "single_obligor_limit_pct": 10.0,
    "top_5_obligor_limit_pct": 40.0,
    "ccc_bucket_limit_pct": 7.5,
    "minimum_oc_ratio": 120.0,
    "minimum_diversity_score": 40.0
}

Cushion Analysis¶

Understand your compliance headroom at a glance:

Learn more about cushion analysis

Real-Time Alerts¶

Get notified immediately when thresholds are breached or approaching:

• Email notifications
• Webhook integrations
• Slack alerts
• PagerDuty escalation

Learn more about alerts

Trustee-Ready Reports¶

Generate professional compliance reports in PDF or Excel format:

• Executive summary with pass/fail counts
• Detailed test results with calculations
• Historical trend analysis
• Recommendations based on results

Learn more about reporting

Quick Start¶

Running Your First Compliance Test¶

# Run compliance tests on a workbook
curl -X POST https://api.calcbridge.io/api/v1/compliance/run \
  -H "Authorization: Bearer $TOKEN" \
  -H "Content-Type: application/json" \
  -d '{
    "workbook_id": "550e8400-e29b-41d4-a716-446655440000",
    "test_suite": "standard_clo"
  }'

{
  "job_id": "job_abc123",
  "status": "completed",
  "results": {
    "total_tests": 24,
    "passed": 22,
    "warnings": 1,
    "failed": 1,
    "pass_rate": 91.7
  }
}

Compliance Testing in This Section¶

Integration with What-If Scenarios¶

Compliance testing becomes even more powerful when combined with What-If Scenarios. Before executing any trade, you can:

1. Create a scenario with the proposed trade
2. Run compliance tests on the scenario
3. Compare before/after compliance status
4. Make informed go/no-go decisions

flowchart LR
    A[Current<br/>Portfolio] --> B[Create<br/>Scenario]
    B --> C[Add<br/>Trade]
    C --> D[Run<br/>Compliance]
    D --> E{Pass?}
    E -->|Yes| F[Execute<br/>Trade]
    E -->|No| G[Modify or<br/>Reject]

    style E fill:#FEF3C7,stroke:#F59E0B
    style F fill:#DCFCE7,stroke:#22C55E
    style G fill:#FEE2E2,stroke:#EF4444

Audit Trail¶

Every compliance test run is logged with complete audit information:

• Who ran the test (user ID, email)
• When the test was executed (timestamp with timezone)
• What data was used (workbook version, data snapshot)
• Results of each individual test
• Configuration used (thresholds, test suite version)

This audit trail is essential for:

• SOC 2 compliance
• Regulatory examinations
• Internal audits
• Historical analysis