Shadow Pricing


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.

BREAKING DOWN '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.

  1. Money Market Fund

    An investment fund that holds the objective to earn interest ...
  2. Intangible Asset

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

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

    Any non-traditional asset with potential economic value that ...
  5. Net Asset Value - NAV

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

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