Until 2005 auction-rate securities (ARSs) were viewed as “cash equivalents” since the inception of the ARS market in 1984. And like other cash-equivalent securities, they were marked at par.

This made sense when frequent auctions (often every seven days) provided almost-instant liquidity to their holders. But since February 2008, auctions have been failing, leaving investors stuck with highly illiquid paper – sometimes with no maturity date – with a yield that's unrealistic, given the illiquidity of the securities.

Unless or until this situation reverses itself, reporting entities holding such paper have no other options but to set a “fair value” for the securities, which requires marking them at a discount from par. But how deep should this discount be?

Pluris has in-depth expertise valuing complex securities with limited or uncertain liquidity horizons. Our relationship with the Restricted Securities Trading Network (RSTN), and the LiquiStat™ database, provides us with extensive information on the prices – and discounts – that buyers and sellers of ARSs are willing to trade at.

For information about our webinar and special report on valuing Auction-Rate Securities, click here.

For more information on how the LiquiStat database can help you and your clients, please e-mail us.

NEW! For a free copy of our "ARS Holders Study," click here.

Click here to access Espen Robak's presentation on valuing ARS.