Another way to cheat at pricing II

A.N. Observer, an individual with both hard-won experience in pricing third tranche synthetic mezzanine ABS CDOs with the CDS kickers, and familiar with European best practices in the pricing thereof, writes, in reference to Tuesday’s post (link below):

An honest hedge fund would not be using three brokers to obtain a price quote. If you are honest, then you use an independent pricing service such as, merely by way of example, [soon-to-be Citibank subsidiary] BiSys. I’m serious…they are honest because they ask three brokers for a price.

Speaking of eerie coincidences and European best pricing practices, the London-based Alternative Investment Market Association, which in March updated its own ‘Guide to Sound Practices for Hedge Fund Valuation,’ got around to applauding the ‘Consultation Report on the Principles for the Valuation of Hedge Fund Portfolios,’ also released in March by the International Organization of Securities Organizations:

AIMA registers its view that, given the nature of the subject and the significant progress already made by the industry—and noting that ‘no one size fits all’—regulation would neither be appropriate nor helpful.

NakedShorts registers his view that the alleged “significant progress” made by “the industry”—which is a significantly larger universe than mere hedge funds, including investment bank counterparties, institutional investors and credit ratting (not a typo) agencies, to name a few—falls somewhat short of earning its adjective. The first few threads have been pulled from Mr Ponzi’s suit and the only question is whether this week’s needlework will be sufficient to hold the “confidence game” game together. Or whether, as the fray continues, those Hickey Freeman pants will become entirely unravelled.

Earlier: Another way to cheat at pricing
NakedShorts Jun. 26 2007

Even earlier: The hard school of experience
NakedShorts Mar. 22 2007