Monday, February 02, 2009

Dealing with bad loans

The FT reports on the latest efforts to deal with bad loans and comes to two methods of vauing these assets:

It would acquire securities that had already been heavily marked down by financial institutions, probably using a valuation model rather than an auction-based process to determine pricing.

There is huge uncertainty over the price of assets. How do we pick the correct value? No body knows. As a result, there is no market.

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