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1 Valuing individual investments the role of market value If the asset is traded on an open market and published prices are freely available, then market value is a reference point for all valuations. If there is no market price then other methods of determining the best proxy for market value should be used. Possible proxies for market price are considered later in this chapter. Having first established either the market value or the proxy market value on the valuation date, the actuary may then decide to employ an alternative asset valuation method appropriate to the purpose of the valuation, in particular adopting consistent methods for the values of assets and liabilities. Actuaries are often interested in the relationship between the value of a funds assets and its liabilities. But as it may be difficult to place a market value on the liabilities, it may be appropriate to use an alternative value for the assets. Increasingly the trend has been to use a market value of assets or a proxy to it for all purposes and then to ensure equivalence by adopting a marketconsistent method of valuing the liabilities. Previous methods of adjusting the asset valuation method to fit with a predetermined liability valuation basis have fallen out of favour as they mean that neither the value of assets nor liabilities are related to observable data. Marketconsistent and fair value methods of valuing liabilities are described in a later chapter, Valuation of liabilities. The aim of using such an approach is that the value of assets and liabilities will react in similar ways to changes in the investment environment, eg interest rates, inflation. We will discuss the merits of market value, and a range of other approaches to valuing an individual investment, in the next section.