In the last twelve months, I have written almost thirty articles about leveraged loans and collateralized loan obligations (CLOs), because these instruments are all too often illiquid and opaque. Moreover, measuring their market, credit, and market liquidity risks is difficult, especially in an economic or market downturn. The Bank for International Settlements, in its Quarterly Review released today, estimates that the global leveraged loan market is about $1.4 trillion, a rise of 100% since 2007. The vast majority of those leveraged loans, $1.2 trillion, are in U.S. dollars, with the remainder mostly denominated in Euros.
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