Setting the standard: two big arbitrage funds tell how they value their portfolios


Citadel Investment, Chicago, Illinois

Procedures: Traders are responsible for initial pricing of their own portfolios, using data feeds and third-party marks for highly liquid assets. For the small portion of securities that are highly illiquid, prices may be marked-to-model.

Checks and balances: At the end of each day, Citadel's traders are "locked out" from making further changes to the day's prices. Back office employees who report into the chief financial officer take over, verifying pricing by comparing marks to where prime brokers and other counterparties are carrying the securities, or obtaining dealer quotes from brokerage firms. In the rare