The value of a system
The recent turmoil in the financial markets caused the value of investors' portfolios to plunge, sparking a flurry of margin calls by prime brokers. In response, some buy-side firms have started to acquire valuation systems of their own amid widespread uncertainty over the prices of complex securities held as collateral. By Clive Davidson
The discord in the financial markets over the past few months has raised plenty of doubts - the valuation of collateralised debt obligations, the role of rating agencies and how to manage liquidity risk, to name just a few. Even the most widely accepted and dependable of risk mitigants - the posting of collateral - is under scrutiny.
At the height of the turmoil, reports began to surface of disputes between hedge funds and prime brokers over margin calls and the subsequent seizing and liquidation
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