Valuation of bonds
Hierarchy of approaches to bond pricing
According to the Regulation of the Minister of Finance, financial assets, such as bonds, held by an investment fund should be valued using a reliably estimated fair value, which is considered to be:
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a price from the active market,
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in the absence of a price from the active market – a price obtained using a valuation model, where all significant input data are observable directly or indirectly,
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in the absence of a price from point 1 and 2 – fair value is determined using a valuation model based on unobservable data.
Bond pricing – observable data
Observable data constitute inputs for the model that reflect the assumptions which would be made by market participants when valuing an asset or liability, taking into account directly or indirectly:
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prices of similar assets or liabilities from the active market,
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prices of identical or similar assets or liabilities from a market that is not active,
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inputs to the model other than prices mentioned in the previous points, which are observable for a given asset or liability, in particular:
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interest rates and yield curves,
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volatility,
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credit spread,
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input data confirmed by the market.
Bond valuation – unobservable data
Unobservable data, on the other hand, are input data for models developed for using all reliable information available under the circumstances about the assumptions made by market participants that meet the fair value measurement objective.
Bond valuation data sources
Data used for valuation purposes should come from reliable and credible sources. Valuations are prepared on the basis of the characteristics of the instruments undergoing valuation set out in the issue documents and on the basis of market data. We use Polish and international databases, such as: S&P Capital IQ Pro – delivered by S&P Global Market Intelligence, which forms part of a group affiliated with Standard & Poor’s (S&P) – one of the three largest and most respected agencies in the world.
Validation of bond valuation models
In accordance with the Regulation of the Minister of Finance of 28 December 2020 amending the Regulation on specific accounting principles for investment funds, the valuation models used for financial asset valuation should be reviewed periodically at least once a year.
It is recommended to update the valuation model more frequently, in particular when:
the only source of the market price used in the valuation is a single trading partner or price provider,
the market price used in the valuation is for listed illiquid assets,
the market price used in the valuation was provided by a trading partner which originated the instrument, especially when the originator also finances the fund’s position in the instrument,
the valuation was influenced by parties related to the company or the fund or other parties with a financial interest in the fund’s performance.
A review of the applied valuation models, including valuation principles and procedures, should include, as a minimum:
verification of valuations by comparing with prices obtained from trading partners and over a longer period of time,
validation of valuations by comparing obtained prices with the latest balance sheet carrying values,
consideration of the reputation, consistency and quality of the valuation sources,
comparison with values generated by a third party,
examination and documentation of exemptions,
disclosure and inspection of all differences that seem unusual or change depending on the valuation benchmark established for a given type of asset,
testing for stale prices and implied parameters,
comparison with the prices of any related assets or their hedges,
review of the input data used in model-based valuation, in particular of those to which the model’s price exhibits significant sensitivity.
Meet CMT Advisory’s team of experts with expertise in valuation of bonds
He oversees a team responsible for the implementation of M&A transaction processes, especially projects involving the sale of businesses and the acquisition of investors. He also provides support in the area of corporate governance.
Doctor of Economics, for many years an academic in the Department of Investment and Capital Markets at the Poznań University of Economics and Business. Co-founder and CEO of CMT Advisory. Member of supervisory boards in numerous capital companies.
He supervises and supports the team implementing projects related to company restructuring. He also specialises in corporate finance, corporate governance and M&A transactions, especially offering advice on acquisition strategies and obtaining financing.
With a post-doctoral degree in Finance, he is a lecturer and professor of the Poznań University of Economics and Business, where he heads the Department of Investment and Capital Markets. For years, he has been involved in banking, private equity and advisory industry. Co-founder and Board Member of CMT Advisory. He is a member of numerous supervisory boards of capital companies. Director of the Program Council of the Family Business Institute.
Responsible for the supervision and implementation of projects relating to mergers and acquisitions, e.g. providing advisory services to the selling and the buying parties. Specialist in ownership buy-outs, company valuations and financial modelling.
Doctor of Finance Sciences, for a long time assistant professor at the Department of Investment and Capital Markets of the Poznań University of Economics and Business. He has also studied at Harvard University and London School of Economics. Stockbroker eligible for offering investment advisory services. A former lecturer in the Stock Exchange School of the Warsaw Stock Exchange.
He implements M&A transaction processes, where he provides advice both to sellers and buyers. He specialises in finding investors, negotiations and corporate finance. His field of expertise includes projects related to company and asset valuations as well as shareholder buyouts.
He has been involved in the advisory sector since his studies at the Poznań University of Economics and Business. Currently, he is a Partner at CMT Advisory and a supervisory board member at Decomonkey Sp. z o.o. and STX Next Sp. z o.o.
He is responsible for corporate finance, cooperation with financial institutions and M&A transactions. He supports entrepreneurs in financial planning, establishing market values of key assets and implementing supervisory systems and recovery plans. His areas of activity also include preparing expert evidence for court and arbitration disputes and financial advisory in restructuring proceedings.
Active in the financial advisory sector for over a decade. A graduate of the Poznań University of Economics and Business (with specialisations in Investment and Real Estate Management and Capital Investment and Corporate Financial Strategies) and studied at Athens University of Economics and Business. Doctor of Finance since 2018 and holder of the prestigious international professional title of a Chartered Financial Analyst (CFA).
A CMT Advisory Partner supervising and implementing projects in the area of M&A transactions as an advisor to the selling or the buying party. He also provides economic consultancy advice and supports in restructuring and reorganisation of enterprises, e.g. composition and sanative proceedings.
He has been gaining competence in the consulting industry since his Master’s studies at the Poznań University of Economics and Business. In the meantime, he has completed doctoral studies in the Department of Investment and Capital Markets at this very university.
Responsible for the implementation of M&A transaction projects, including advice on investment and divestment processes on the private market (acquisition and sale of businesses). Her activities moreover include valuation of enterprises and intangible assets, e.g. trademark valuation, as well as valuation of debt instruments (bonds).
As of her student years linked with the advisory sector and CMT Advisory. A graduate of the Poznań University of Economics and Business, specialising in Capital Investments and Corporate Financial Strategies. At present she works on the final exam towards obtaining the prestigious CFA title (Chartered Financial Analyst).
He carries out corporate finance projects, where he performs valuations of companies and intangible assets and prepares economic opinions for commercial disputes. A member of the M&A transactions team.
He started working for CMT Advisory still as a student at the Poznań University of Economics and Business, from which he graduated with a specialisation in Capital Investments and Corporate Financial Strategies.
Offers support on financial modelling, budgeting and valuation of companies and their assets. She also carries out projects concerning M&A transactions, preparing opinions for commercial disputes, carrying out asset impairment tests, and corporate governance.
She has been involved in the consulting industry since her student days. A graduate of the Poznań University of Economics and Business with a specialisation in Capital Investments and Corporate Financial Strategies.
He supports entrepreneurs in M&A transaction processes on the buyer’s or seller’s side.
His activities include moreover valuation of intangible and legal assets, valuation of debt portfolios and creation of financial models.
He has been gaining experience in the consultancy industry since his student days. He gained his Ph.D. degree in the field of economics and finance at the Department of Investment and Financial Markets of Poznań University of Economics
Provides support in the areas of M&A transactions, valuation of companies and their assets, and restructuring consultancy. He worls on projects regarding sale and purchase transactions of enterprises, valuations and drafting specialist economic opinions. A member of the team responsible for restructuring processes.
He started working for CMT Advisory still as a student at the Poznań University of Economics and Business, from which he graduated, specialising in Capital Investments and Financial Strategies of Enterprises. Currently he is preparing for the third stage of the CFA (Chartered Financial Analyst) exam.
A member of the Corporate Finance team which supports entrepreneurs in projects concerning reorganisation of the business structure, enterprise restructuring and M&A processes, including preparation of business due diligence for entities planning acquisitions (investment profitability analysis).
He became involved in the consultancy sector as early as a student. A graduate of the Poznań University of Economics and Business, specialising in Banking and in Private Finance Management. Currently he is preparing for the CFA (Chartered Financial Analyst) professional exams.
An alumnus of the Poznań University of Business and Finance with a major in Capital Investment and Corporate Financial Strategies.
Currently preparing for another exam of the ACCA (Association of Chartered Certified Accountants) program. Experienced in financial modelling, restructuring plan preparation, market analysis, and transaction processes.
Carries out projects related to business valuations, financial modelling, M&A transactions, credit risk assessment of companies, and market analyses.
An alumnus of the Poznań University of Business and Finance with a major in ACCA Accounting and Financial Management.
He carries out projects in the field of valuations of companies and their assets as well as M&A and restructuring consultancy. Supports business sale and purchase transactions, implementation of valuations and preparation of expert economic reports. A member of the team responsible for clients in the loan and debt management industry.
Works at CMT Advisory since the completion of his studies at Poznań University of Business and Finance, where he majored in ACCA Accounting and Financial Management. He is currently a PhD student at the Doctoral School of Poznań University of Business and Finance, in the process of acquiring the ACCA (Association of Chartered Certified Accountants) qualification.
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