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Debt valuation adjustment.
At Bank of America, sales and trading revenue dropped 16percentt after accounting for certain debt valuation adjustments.
The compensation-to-revenue ratio may be particularly difficult to calculate in 2011 because of an obscure accounting maneuver called debt valuation adjustment.
The modifications would require: (1) the development of a benchmark on debt valuation to insure creditors receive fair value in a reorganization; (2) the inclusion of all debt, except secured debt, in the process - specifically multilateral, official and domestic debt - to eliminate debt discrimination; (3) the use of cramdown; and (4) minimization of the role of the IMF.
Return on equity, a measure of how efficiently shareholder money is being deployed, fell to 7.6 percent from 9.2 percent in the year-ago period Excluding charges related to the bank's credit spreads, known as debt valuation adjustments, net revenue in institutional securities, which houses the fixed-income department, was $4.4 billion, compared with $5.1 billion in the period a year earlier.
That would be the first annual loss in Morgan Stanley's history, although the bank says that its revenue is back to 2007 levels and that its profits are being dragged down by losses it is forced to take on its debt valuation as the company's health improves.
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The purchase price amounts to $442 million for 100percentt of the business, or a cash and debt free valuation of $390 million, Axel Springer said today.
As yields rise, investors begin to shift money from equities to debt, depressing valuations of the former.
This is especially true with convertible debt and what valuation figures will be based on later.
Most convertible debt has a valuation ceiling and also gets a discount on conversion.
Analysts also questioned the viability of the sale when Europe's telecommunications industry faces rising debt and falling valuations.
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