Following the IFRS 13 guidance and modern asset pricing principles, the value of each asset in the EDHECinfra universe on each index calculation date is computed using the income or discounted cash flow (DCF) approach.
- Arrive at a cash flow forecast at the valuation time i.e. the gross cash flows that are expected to accrue to the owners of the asset (before any management or other fee where relevant) - see Cash Flow Forecasting Methodology
- Determine the relevant term structure of interest rates that has the an equivalent duration (i.e. horizon) than the investment.
- Estimate the market price of risk for the relevant investment at the time of valuation.
- Finally, an asset price is computed.