Shadow Pricing

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DEFINITION of 'Shadow Pricing'

1. The actual market value of one share of a money market fund. In this case, shadow pricing refers to securities that are accounted for based on amortized costs rather than a market valuation assignment.
2. The assignment of dollar values to non-marketed goods such as production costs and intangible assets. Shadow pricing is usually subject to various assumptions and is fairly subjective within certain guidelines.

INVESTOPEDIA EXPLAINS 'Shadow Pricing'

1. A distinguishing feature of money market funds is that their shares always have a nominal net asset value of $1. However, the actual net asset value may be slightly higher or lower than $1. Money market funds are required to disclose the shadow price of shares to give investors more detailed information about the fund's performance.
2. When performing different types of cost-benefit analyses, certain costs or benefits are intangible and, in order to fully analyze a scenario, all of these variables must be assigned values. For example, when performing a cost-benefit analysis on a mining operation, the lost intangible value associated with the scenic views must be priced and factored in as a cost.

RELATED TERMS
  1. Money Market Fund

    An investment fund that holds the objective to earn interest ...
  2. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  3. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  4. Shadowing

    The process of creating values for variables that don't rely ...
  5. Alternative Asset

    Any non-traditional asset with potential economic value that ...
  6. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
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