Many preparers and auditors of financial statements use, or permit the use of, theoretical valuation models for valuing illiquid derivative instruments, even though the results are inaccurate and misleading.
The Black-Scholes method was the predominant model for many years, and was even endorsed by accounting rules prior to the introduction of FAS [...]
Posted on May 1st, 2012
This Policy Statement (PS) contains feedback on the responses to the Consultation Paper CP11/30 Proposed Regulatory Prudent Valuation Return, and subsequent changes to the FSA’s rules. In CP11/30, the FSA consulted on changes to the GENPRU and the SUP. These will create a new reporting requirement to complete a regulatory return that will show, [...]
Posted on May 1st, 2012
In the last decade, the efficient market hypothesis and its validity for emerging markets grew as a fertile topic of debate in finance. However, the dilemma of market efficiency still remains intractable. It is more likely that any literature review in respect of market efficiency would produce contradictory results: for a single paper [...]
Posted on April 16th, 2012
Return anomalies are most pronounced among distressed stocks. The authors of this paper attribute this finding to the role of misvaluation and investors’ inability to value distressed stocks correctly. They treat distressed stocks as options and construct a valuation model that explicitly takes into account the value of the option to default (or [...]
Posted on February 21st, 2012
The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a consultation report on Principles for the Valuation of Collective Investment Schemes, setting out principles that can be used to assess the quality of regulation and industry practices concerning the valuation of collective investment schemes (CIS), thereby ensuring that investors [...]
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