Ad 1) No. Where there exists a secondary market for contingent liabilities, it is permissible to mark them to market, as one would be able to repurchase them at the market discount.

Where there is no secondary market, however, it is not possible to mark to market. Thus no convention can be inconsistent with the mark-to-market convention. Mark-to-market returns NAN, so any valuation convention which is politically palatable may be applied to illiquid liabilities.

"NAN" is not the same as "zero." This last point is the one that seems to have caused some confusion with AIG et al.

- Jake

Friends come and go. Enemies accumulate.