Shadow Pricing

What is '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.

RELATED TERMS
  1. Shadowing

    The process of creating values for variables that don't rely ...
  2. Shadow

    A small line found on a candle in a candlestick chart that is ...
  3. Amortization Of Intangibles

    A tax term relating to the practice of deducting the cost of ...
  4. Cost-Benefit Analysis

    A process by which business decisions are analyzed. The benefits ...
  5. Shadow Market

    An unregulated private market in which investors can purchase ...
  6. Shadow Banking System

    The financial intermediaries involved in facilitating the creation ...
Related Articles
  1. ETFs & Mutual Funds

    What is the Shadow Banking System?

    The shadow banking system is composed of financial institutions that do not take deposits in the tradition sense.
  2. Investing

    Explaining Amortization In The Balance Sheet

    Amortization is important to account for intangible assets. Read to find out more about amortization.
  3. Investing

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  4. Investing

    Explaining Amortization In The Balance Sheet

    Amortization occurs when an asset’s value decreases over time, usually over its estimated useful life.
  5. Investing

    How to Calculate Your Tangible Net Worth

    Your net worth can be calculated with a simple equation.
  6. Financial Advisor

    Becoming an Advisor: Why You Should Shadow a Pro

    Meeting with financial advisors and following them during a workday will help you to know if it’s worth the time and effort to make the career switch.
  7. Markets

    The Rise And Fall Of The Shadow Banking System

    We look at the evolution, failure and fallout from the shadow banking system.
  8. Investing

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  9. Investing

    Mark-To-Market: Tool Or Trouble?

    Mark-to-market accounting can be a valuable practice, but all bets are off when the market fluctuates wildly.
  10. Investing

    Goodwill and Intangible Assets: One And The Same?

    "Goodwill" is a broad category for non-physical assets that are impossible to separate from the business itself, whereas "intangible assets" are individually identifiable and can be sold separately ...
RELATED FAQS
  1. How does one amortize intangible assets?

    Understand what distinguishes intangible assets and how companies are required to amortize their value over time to recover ... Read Answer >>
  2. What are the differences between amortization and impairment?

    Learn the differences between amortization and impairment as they relate to intangible assets held on a company's balance ... Read Answer >>
  3. How do intangible assets appear on a balance sheet?

    Understand how various types of intangible assets are handled in a company's accounting and which of them you can find on ... Read Answer >>
  4. What kinds of events or circumstances will increase or decrease the proportion of ...

    Learn the variety of events and circumstances which can significantly increase or decrease the proportion of intangible assets ... Read Answer >>
  5. What is the difference between a spot rate and a forward rate?

    Understand the concept of intangible assets and learn how they are handled in the purchase agreement when a company is bought ... Read Answer >>
  6. What types of companies have a high proportion of intangible assets?

    Explore what types of companies are most likely to have a high proportion of intangible assets, due to the nature of the ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center