Level 1, Level 2, Level 3 Assets

RECENT NEWS
SeekingAlpha  Dec 13  Comment 
By Weighing Machine: Shares of Altisource Residential (RESI) have soared +89% this year as the company has rapidly grown it's portfolio of NPLs. RESI now trades at 1.5x book value - a 30-50% premium to it's peers. Growth has been facilitated by...
THE PRAGMATIC CAPITALIST  Jan 26  Comment 
I've long been critical of Ken Lewis.  For being known as a merger wizard he sure has made some big mistakes.  The Countrywide buyout has to be one of the most fantastic fumbles in M&A history.  Buying up billions of level 3 assets, at the...
Bull Bear Trader  Dec 11  Comment 
US financial institutions reported an increase in Level 3 assets in Q3 to $610 billion (see Financial Times article). This amounted to an increase of 15.5 percent from Q2 as low liquidity has made it difficult to sell MBS and CDO assets....
Stock Market Analysis, Trading, And Financial Commentary - Rebel Traders  Jul 30  Comment 
This just in: FASB VOTES 5-0 TO DELAY IMPLEMENTATION OF OFF BALANCE SHEET RULE.This is the absolute worst decision I can imagine. The market "needs" clarity. The financial institutions need to reveal what they have in their level 3 assets...
Bullish Bankers  Jul 24  Comment 
Issues surrounding the credit markets still remain on many banks’ balance sheets. Level 3 assets are by no means a new thing, but merely play a new role in this environment. As financial institutions have taken write-downs of more than $300...
Jutia Group  Apr 21  Comment 
In the first quarter, Goldman Sachs Group Inc. (GS) packed another $27 billion worth of illiquid assets onto its balance sheet - a 39% increase that brought the total to $96 billion.And Goldman wasn’t alone. Morgan Stanley (MS) reported...
Jutia Group  Apr 21  Comment 
In the first quarter, Goldman Sachs Group Inc. (GS) packed another $27 billion worth of illiquid assets onto its balance sheet - a 39% increase that brought the total to $96 billion. And Goldman wasn’t alone. Morgan Stanley (MS) reported that...
Contrarian Profits  Apr 21  Comment 
In the first quarter, Goldman Sachs Group Inc. (GS) packed another $27 billion worth of illiquid assets onto its balance sheet - a 39% increase that brought the total to $96 billion. And Goldman wasn’t alone. Morgan Stanley (MS) reported that...
Money Morning  Apr 21  Comment 
By Jennifer Yousfi Managing Editor In the first quarter, Goldman Sachs Group Inc. (GS) packed another $27 billion worth of illiquid assets onto its balance sheet - a 39% increase that brought the total to $96 billion. And Goldman wasn't...
Stock Market Analysis, Trading, And Financial Commentary - Rebel Traders  Jan 18  Comment 
Merril Lynch (MER) reported their quarterly earnings at 7:00 am Eastern time this morning, and with their terrible report it only set the mood for the rest of the bad news that came later. The financial institutions are still suffering greatly...




 
TOP CONTRIBUTORS

Level 1, 2, and 3 assesses a company's assets based on the degree of certainty around the asset's underlying value. Level one assets can be valued with certainty because they are liquid and have clear market prices. At the other end of the spectrum, Level 3 assets are illiquid and estimating their value requires inputs that are unobservable and reflect management assumptions.

Level 1

Financial assets and liabilities whose values are based on unadjusted, quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, listed derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations). If you can look up an up-to-date price on a major exchange it's a level 1 asset.

Level 2

Financial assets and liabilities whose values are based on their quoted prices in inactive markets, or whose values are based on models - but the inputs to those models are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: a) Quoted prices for similar assets or liabilities in active markets (for example, restricted stock); b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently); c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (examples include certain residential and commercial mortgage related assets, including loans, securities and derivatives).

Level 3

Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain private equity investments, certain residential and commercial mortgage related assets (including loans, securities and derivatives), and long-dated or complex derivatives including certain foreign stock exchanges, foreign options and long dated options on gas and power). Level 3 assets trade infrequently, as a result there are not many reliable market prices for them. Valuations of these assets are typically based on management assumptions or expectations.

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