Financial pricing for the 21st century
Putting a price on assets for which no active market exists is a process mired in complexity and no little controversy. But the pricing models of yesteryear are simply not up to the job. David Patrikarakos looks at the new generation of valuation models which third-party providers are developing to combat the unique challenges of today's stressed times
As financial markets have continued to unravel and the industry seeks ways to combat systemic flaws, third-party valuation of illiquid assets has become vital. With toxicity abundant, effects have been severe and widespread. The need for any form of capital, and any degree of certainty, has forced banks to price their holdings, even when assets are no longer tradable because markets have frozen up.
In order to reflect these conditions, institutions have posted huge writedowns on their assets in
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