Asset Pricing at Heart of Credit Crunch

“Most of the market volatility is the uncertainty of how to price assets. As a result, institutions are unwilling to loan money, even for a short period of time because they don’t know how to measure the quality of the assets being used as collateral. Consequently, credit markets that normally provide liquidity to run a business dried up”

This quote from a respected financial planner in my circle brings to the forefront one of the biggest problems we’re currently facing: how do lenders value assets on which loans are based? Whether your client’s home equity line of credit or your company’s, the valuation of each relies on established guidelines which are difficult to predict in this current economic climate.

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