Fair Value analysis consists on 3 key points:
- Review the valuation methodology applied by the client
First, we do a basic analysis of the instrument. We determine the best methodology based on standard market practice, for example, discounted cash flow to the instrument to be valued at fair value IFRS13
2. Review of critical terms (internal rates of return, critical dates, coupons, among others.)
Every single input has a hierarchy. Based on fair value measurement, we must decide which input to use to get a higher level.
3. Fair value hierarchy
A market price will always be better than an estimate, and that is why a critical eye is needed to decide on methodology and inputs to have a fair value. A mix in levels will end up in a lower hierarchy.