Funds valued by amortized cost method have a small fluctuation in net value and a stable trend. However, the net value of the fund valued by the market value method fluctuates relatively.
The market value method refers to the valuation method calculated according to the market transaction price, which can accurately reflect the current market value of the fund. If the bond price rises sharply in the market, the net value of the fund will also rise accordingly. If the bond price falls in the market, the net value of the fund will also fall accordingly.
The calculation formula of amortized cost method is:
Premium issuance: amortization amount per period = face value × coupon rate-actual cost × actual interest rate; Amortized cost at the end of the period = amortized cost at the beginning-amortization amount in the current period = initial actual cost-accumulated amortization amount; When discounting: amortization amount per period = actual cost × actual interest rate-face value × coupon rate; Amortized cost at the end of the period = amortized cost at the beginning+amortization in the current period = initial actual cost+accumulated amortization.
The differences between the amortized cost method and the market price method adopted by money market funds are as follows:
Valuation by amortized cost method mainly reflects that the investment tools of money market funds are mainly short-term. Its income is mainly reflected in the income of short-term interest, its capital appreciation should be very small, and the income channel is not the income of capital appreciation. Therefore, in this respect, amortized cost pricing may be more conducive to the development of this variety, and investors are also clear at a glance.
The amortized cost method combined with the use of shadow price is the best accounting principle for bond funds in the current market environment, while the use of fair shadow price and the strict implementation of deviation adjustment strategy are the necessary safeguard measures for the use of amortized cost valuation method.
Refer to the above content: Baidu Encyclopedia-amortized cost method