Mark-to-model approach

If – no market prices can be determined for a financial product, or – market prices are unreal for the financial market as a whole or for a sub-market or market segment (e.g. panic selling, capitulation selling, panic selling) due to a specific situation on the financial market, then IFRS exceptionally allows the value of a security to be estimated individually using a theoretical model. – Using the example of securitized securities from tranches of collateralized debt obligations that had become completely worthless, it was argued that this approach opened the floodgates to arbitrariness. This is because many of these securities had sunk irrevocably and forever to zero value in the course of the subprime crisis and had thus become a memory item (pro memoria item) in accounting terms. – See Absence capitalism, contagion effects, anticyclicality, representation, credible, first-loss clause, financial crisis, credit card fiasco, collateral crisis, emergency liquidity assistance, mark-to-funding approach, mark-to-market approach, pay-green initiative, procyclicality, rule-based, shock, external, subprime lending, comparability, securitization structure. – Cf. ECB Monthly Bulletin, November 2007, pp. 18 ff. (impact of the subprime crisis on individual sectors of the financial market).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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