How are structured products valued?
Decompose the payoff, validate inputs and model uncertainty before relying on a valuation.
Structured-product valuation models the contractual payoff using market inputs, issuer or counterparty credit, interest rates, volatility, correlation, optionality, liquidity and fees. The method depends on the instrument and reporting purpose. IFRS 13 requires IFRS fair-value measurements to use assumptions that market participants would use; specialist independent valuation or model validation may be required.
Valuation workstreams
The reviewer should reconcile legal terms to model logic, source observable inputs, identify unobservable assumptions, validate numerical implementation, test sensitivities and explain valuation uncertainty. Counterparty and funding effects require consistent treatment under the applicable framework.
Model-risk checklist
| Area | Question |
|---|---|
| Terms | Does the model reproduce every contractual cash-flow and trigger? |
| Inputs | Which data are observable, adjusted or estimated? |
| Method | Why is the selected model suitable for the payoff? |
| Validation | Has implementation been independently tested? |
| Uncertainty | Which sensitivities, reserves and disclosures are required? |
Official sources reviewed
| Official source | Why it matters |
|---|---|
| IFRS Foundation; IFRS 13 | Official fair-value measurement framework for IFRS reporters. |
| BIS; Minimum capital requirements for market risk | Official Basel market-risk framework and model-risk context for banks. |
Sources reviewed September 2026. Rules, standards and market practice can change; verify the current position with qualified advisers.
Related Matchpoint resources
Last updated: September 2026.
The drivers can include rates, volatility, correlation, credit, liquidity, funding, dividends, foreign exchange and contractual barriers or triggers.
Differences can arise from market data, model selection, calibration, credit and funding treatment, liquidity assumptions, reserves and valuation time.
No. This page is educational. Specialist independent valuation, audit, accounting, legal or regulatory expertise may be required for a specific instrument.
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