Evening,
Consistency between the valuation of assets and liabilities is an idea that comes up a number of times in the course.
It makes sense to me that we can only take the market value of assets where we have a market value of the corresponding liabilities (if available) or use market based discount rates.
Question:
When we calculate liabilities using a stable rate of interest , would we treat our assets as though it was invested in a suitable index and discount the cashflows using long term assumptions?
(Is this a possible approach that may be taken in practice where valuation interest rates are used to derive liability values).
Any comments would be most welcome, this has been on my mind for days!!
Thanks.
Consistency between the valuation of assets and liabilities is an idea that comes up a number of times in the course.
It makes sense to me that we can only take the market value of assets where we have a market value of the corresponding liabilities (if available) or use market based discount rates.
Question:
When we calculate liabilities using a stable rate of interest , would we treat our assets as though it was invested in a suitable index and discount the cashflows using long term assumptions?
(Is this a possible approach that may be taken in practice where valuation interest rates are used to derive liability values).
Any comments would be most welcome, this has been on my mind for days!!
Thanks.