In valuation hierarchy, the last choice is "subjective unobservable input". What is this cr*p? Can it be original cost or book value?作者: oneboy 时间: 2011-7-11 19:04
My assumption on this:
You may mark from an internal model, and there's a lot of stuff that goes into that pricing that may or may not be observable in the market eg:
- recovery rates
- correlation params eg on cdo tranches/nTD's
- vols on assets where there is no good option market (at the energy company i used to work at we would calibrate vols based on broker quotes, even though the market was practically non existent)
- prepayment rates if you're marking RMBS (although in reality you'd be more likely to mark based on an index or similar more liquid tranche)
- hazard rates etc on insurance deriv's作者: Analti_Calte 时间: 2011-7-11 19:04
Would be assumptions that are not observable in the market - for example, interest rates, f/x rates, etc. are observable inputs.
An unobservable input would be something you use in your valuation model that is not observable in the market - such as the items kurupt1 listed above.
THink of like a CDO valuation - lots of assumptions go in there, and alot of it can get pretty "squishy"
Edited 1 time(s). Last edit at Tuesday, April 26, 2011 at 01:50PM by smileygladhands.作者: mik82 时间: 2011-7-11 19:04
