The valuation conundrum

Tue Oct 30, 2007

Managers throw up their hands, mark to model and smooth out returns; are they all attempts to avoid the problem?

By Julie Dalla-Costa

When JPMorgan Chase, Citigroup and Bank of America last month announced a plan to bail out the structured investment vehicles that are at the core of the credit freeze, one might have expected the markets to take heart. After all, the $400 billion in SIV assets are possibly the biggest weight on the credit markets. If the banks weren't forced to sell these assets into the secondary market or write them down substantially, could life return to normal?

But almost as soon as the plan was leaked, the limits of this latest bit of financial engineering became obvious. "As several leading hedge funds have halted investor transactions because assets of this type cannot be valued by anyone, how can these SIVs fairly transfer assets to this new...

ISSN: 2151-1845 / CDC10004H

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