Conceptually, the answer is simple: Haircuts should reflect current market values, which are well below face values.
The county has been making annual assessment updates since 2003 to try to make sure assessments accurately reflect current market values.
Adjustment of the book value or collateral value of a security to reflect current market value.
Instead of evicting residents and creating yet another speculative market for houses, mortgages for those underwater should be modified to reflect current market value.
The policy, which requires companies to value assets at prices that reflect current market conditions, has come under intense scrutiny after banks took billions of dollars in write-downs when the market for mortgage-backed securities dried up following the subprime meltdown.
Although forward curves should never be viewed as a price forecast, they reflect current market expectations.
For example, while Freddie Mac's portfolio contains many securities backed by so-called subprime and alt-A loans, which are one step up from the riskier mortgages, the company has not written down those loans' values to reflect current market prices.
However, in Section 'Experiment 5: Recalibrating R&C's model to reflect current market conditions', when AWS prices are updated to represent current prices, we vary the value of C to ensure the model still benefits users.
Under current accounting rules, financial institutions have already been required to write down the value of mortgage-backed securities to reflect their current market value.
Though most of those options had exercise prices above current market value, it was still a pro-investor gesture.
That put the options "in the money" by setting their price below the current market value.
