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Views on non-Normal markets [71]

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Bullet points include: Some have argued that increased use of marking-to-market (i.e. ‘fair’ or ‘market consistent’ valuations) has contributed to the current crisis. Alternative is amortised cost, i.e. assume hold to maturity. Will the firm be in control of its own destiny throughout the life of the instrument? Mortgage backed instruments, call dates and refinancing requirements. Bank of England (2008): the greater the perceived risk that a firm might fail, the more market participants valued its assets using mark-to-market principles. Chillingly rational behaviour! Liquidity premia are not captured by firms that do not last the course. Troubled passage of TARP through US Congress

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