Mark-to-Model vs. Mark-to-Market
The speaker covers the differences between two accounting techniques, mark to model and mark to market. The mark to model technique of accounting values securities based on a financial model that has been created. Conversely, the mark to market technique for accounting values securites on a regular basis based on the current market value of that security. This can cause a problem when the market price does not become reflective of the true value of a security. A great example of this can be seen by the firesale pricing during the deleveraging of 2008.