It was never easy to value sliced-and-diced subprime mortgage bundles. Now that the market's dried up, it's nearly impossible.
By now everyone knows that those once wildly popular subprime-backed securities aren't worth as much as was thought. But that still leaves a big question: What are they worth?
For most securities there are procedures for figuring it out. Everyone who takes money from investors - from hedge funds to investment banks to mutual funds - must, typically at quarterly intervals, disclose the net asset value of their holdings. That is no big deal for a mutual fund manager who owns shares of, say, GE, but for a hedge fund manager who has been buying bundles of mortgage-backed securities (which can be, in turn, resliced into another asset class known as a CDO, or collateralized debt obligation), it's a confounding proposition. There simply isn't a reality-based way to value the stuff.
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