MARK TO MODEL
A strategy of calculating the price a certain investment position or portfolio, based on internal assumptions or the result of financial models. Different from the traditional mark-to-market valuations, assets must not have a regular market price which provide accurate pricing, or its valuations count on a complex set of reference variables and time frames. Guesswork and assumptions should be used in order to assign the value of an asset.
Usually, these are derivative contracts or securitized cash flow instruments, and most of it has no liquid trading markets. Mark-to-model assets are open for interpretation and can generate risks for investors.
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