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Securities Data
Volatility of borrower's assets together with liquidation write down of assets on default are the most difficult factors in evaluating the put option. FirstKnow.It maintains a database with 4,500,000 data items which enables accurate historic volatilities of the borrower's assets to be calculated. The volatility of the borrower's assets is not directly observable as the assets themselves are not directly quoted on the stockmarket. Rather, the company's equity is quoted, representing the net of the market value of the assets less the market value of the company's liabilities. The sum of total liabilities and the market capitalisation of equity represents a good measure the market value of the company's assets. FirstKnow.It calculates historic volatilities of the market value of the assets for a period 90 days before and after the balance sheet date so as to avoid distortions due to a changing borrowing structure in the company. Volatilities are then aggregated over successive year-ends to enhance sampling accuracy.