Don,
This point is generally true, but isn't it trivial? The same can be said for any asset/exchange, including cash, gold, etc. If I find myself sitting on a hoard of gold coins in the middle of a large-scale drought/crop failure, I will doubtless find that inflation has suddenly eaten away a great deal of my purchasing power, at least in terms of food and water. The seller may prefer my gold, or may prefer trade-in-kind or some other form of exchange depending on the exact circumstances. All market prices are correct, and all market prices are transitory. The danger is in marking-to-market and then fooling yourself into thinking that you are looking at the correct price, written in stone for all eternity. Some sort of VaR is much more appropriate, at least in dynamic situations. |
