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📊 Price Adjustment

A price adjustment event represents a non-cash change to an asset's fair value — such as a write-down, mark-to-market correction, haircut, or re-rating.

📖 Definition

Price adjustments capture value changes that are not caused by market trading and do not involve cash flow to the investor. They are algebraic modifications (positive or negative) to the asset's calculated fair value.

These events are most relevant for assets that don't have continuous market pricing — such as private debt, illiquid instruments, or assets tracked via the Scheduled Investment provider.

Common Scenarios

Scenario Amount Description
Write-down Negative Reduction in book value due to impairment
Mark-to-market +/− Periodic revaluation to reflect current fair value
Haircut Negative Forced reduction (e.g., during debt restructuring)
Re-rating Positive Upward revision of fair value after positive events
NAV adjustment +/− Net Asset Value correction for closed-end funds

📉 Impact on Market Price

For market-priced assets (stocks, ETFs), price adjustments are rare and typically informational — the market price already reflects the event.

For model-priced assets (Scheduled Investment, manual), the adjustment directly modifies the calculated price:

\[ \text{price}(d) = \text{base{\_}value}(d) + \sum_{i : d_i \leq d} \text{PRICE{\_}ADJUSTMENT}_i \]

Example: Bond Write-down

A corporate bond originally valued at €1,000 is partially written down after the issuer reports financial difficulties.

  • Before adjustment: Calculated value = €1,000
  • Price adjustment event: amount = −200
  • After adjustment: Calculated value = €800

This is not a market transaction — it's a correction to the fair value model.

Example: P2P Loan Haircut

A peer-to-peer loan of €5,000 has a 20% haircut applied during debt restructuring.

  • Price adjustment event: amount = −1,000
  • New fair value: €4,000

📊 When to Use Price Adjustments

Use PRICE_ADJUSTMENT when:

  • ✅ The asset's fair value changes without a market transaction
  • ✅ You need to record a write-down or impairment
  • ✅ The asset is model-priced (Scheduled Investment) and needs a manual correction
  • ✅ A debt restructuring affects the principal value

Do not use for:

  • ❌ Regular market price changes (those are captured by price data points)
  • ❌ Cash payments (use DIVIDEND or INTEREST instead)
  • ❌ Share quantity changes (use SPLIT instead)

🧮 How LibreFolio Handles Price Adjustments

In LibreFolio, a PRICE_ADJUSTMENT event is recorded with:

  • Date: The effective date of the adjustment
  • Amount: The algebraic change (positive for increases, negative for decreases)
  • Currency: The currency of the adjustment
  • Notes: Description of the reason (e.g., "Partial write-down due to issuer default")

For the Scheduled Investment provider, price adjustments are part of the core formula:

\[ \text{price}(d) = \text{initial{\_}value} + \text{accrued{\_}interest}(d) - \sum \text{INTEREST} + \sum \text{PRICE{\_}ADJUSTMENT} \]