oneboy

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