The fundamental change SFAS 157 introduced in measuring fair value for a financial asset or liability is the use of Level 2 and 3 inputs and mark-to-model
valuation techniques to determine fair value.
When a direct asset or a fairly reliable proxy does not exist, however, a mark-to-model
valuation must be calculated.
RAP CD allows market participants to independently price synthetic CDOs in a mark-to-model
framework, and to evaluate the key elements driving market volatility in these instruments.
The standard clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, not just the company's mark-to-model
value," said Linda MacDonald, FASB director and fair value measurements project manager.
With RAP CD, market participants can independently quantify mark-to-model
prices, key risk exposures, and the elements driving volatility, thus providing users with unprecedented transparency from origination throughout the length of an investment.
WeatherBook generates market-based simulations of earnings and recommended hedging strategies in a very intuitive and information-rich interface, displaying single- and multiple-deal scenarios, entire portfolios, and nested portfolios, with associated mark-to-model
values and returns on Value at Risk.
The new version represents a major advancement in functionality, including daily temperature data and complete mark-to-model
analytical capabilities for dynamically tracking the risk to individual weather derivative contracts and portfolios.