US investment bank Merrill Lynch yesterday revealed that it had taken a
$7.9bn (£3.5bn) hit from its exposure to sub-prime mortgages and warned that
further bad news could be around the corner.
The bank said it had taken a conservative view in its valuations, but said
that because valuations in a frozen market were so difficult to calculate,
further hits down the line were a possibility.
Accounting rules allow banks to mark sub-prime instruments to model in a
frozen market, but such modelling is notoriously complicated and open to error.
US investment banks have taken billions of dollars in write-downs from
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