A markets and valuation concept defining how assets are priced and assessed using cash flows, risk measures, or relative benchmarks. It governs estimation of value, required return, and sensitivity to rate or spread changes across asset classes. It does not guarantee accuracy and depends on input quality, market liquidity, and the suitability of benchmarks and assumptions. It supports investment decisions and reporting by providing structured methods to quantify value and risk exposure. The concept is generally stable, though market structure and valuation conventions evolve over time.

Principle

Translate policy into repeatable operational steps so each valuation is executed consistently, with traceable inputs, validations, and approvals.

Demonstration

A procedure for valuing a loan portfolio prescribes extracting contractual cash flows, applying pre-agreed discount curves, performing sensitivity runs, validating model outputs against benchmarks, and obtaining a senior approver's electronic signature.

Misapplication

Skipping validation or signature steps to meet reporting deadlines, which introduces unverified values into financial statements.

Consequence

Proper procedures ensure reproducibility, reduce manual errors, provide audit trails, and allow timely detection of model drift or data issues.

Reversal

The inverse is an informal checklist or verbal agreement that leaves execution details to individual discretion, undermining consistency and auditability.

Boundary

Applies to execution of individual valuation events and their documentation; it does not define high-level governance choices, which belong to the Valuation Policy.

Semantic Tension

Tension arises between rigid, highly automated procedures that limit expert judgment and flexible procedures that permit analyst interventions for atypical cases.

Synthesis

A Valuation Procedure operationalizes policy into a documented sequence of tasks—data, modeling, validation, approval—that produce a defensible valuation instance.