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Financial Instrument Valuation: What it actually means?
Financial instrument valuation estimates the fair value of derivatives, structured notes, convertible instruments and other non-plain-vanilla products for reporting, risk or transaction purposes. Consultants use market data, yield curves, credit spreads and option-pricing or discounted-cash-flow models to arrive at supportable values. They also test model assumptions, check inputs’ observability and explain valuation movements period to period — all of which auditors and regulators expect. This service is important for corporates and funds with treasury, hedging or investment activity that goes beyond basic loans and deposits. Accurate valuation improves transparency and reduces P&L volatility surprises.
