Financial Risk, Past, Present

The purpose of this paper is to explain the reasoning and insight behind the calculation of Indicative Prices for Danish mortgage bonds calculated on NASDAQ on a daily basis.

The paper will be organized as follows: First liquidity in the Danish Mortgage Bond Market will be discussed and the challenges inherent in the market with respect to missing market prices. This will be followed up with a discussion of the principles of Prudent Valuation.

After that there is 2 sections, one that focus on non-callable Danish Mortgage Bonds and one focusing on Fixed Rate callable Mortgage Bonds. Each section, will contain some insight into the calculation and some examples on the calculated indicative prices.

In the last chapter the rating model – which is implemented for the Indicative Prices – will be described. It will all end with a short conclusion.

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