Discounting [12]

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Bullet points include: (Liability) discount rate derived from viewpoint of how the liability is going to be financed Based on expected returns from a pre-determined investment strategy ‘Price’ and ‘value’ typically diverge More relevant for: Some accounting purposes Aggregate (‘ongoing’) funding rather than discontinuance (‘solvency’) valuation of liabilities for open DB pension fund (and other ‘budgeting’ type activities) Maybe transactions involving mutuality (e.g. participating insurance) Taking views on the market being ‘wrong’ (e.g. asset management position taking)

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