Shadow Pricing

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Dictionary Says

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 Says

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.



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