The perils of pricing


As institutional investors pour more capital into hedge funds in hope of gaining better returns, the valuation of credit derivatives and other complex financial instruments has emerged as a major risk management issue for all parties involved. Stewart Eisenhart investigates.

Pension funds’ and other investors’ tastes for more exotic and illiquid securities in the face of fair to middling equities markets, have been eagerly accounted for by the hedge fund community. But a growing number of fun