Unquoted Bonds are debt instruments that are not listed or traded on a recognized public exchange, meaning their prices are not readily available to the general market. In the crypto domain, this concept applies to private debt offerings or tokenized bonds exchanged in over-the-counter (OTC) or permissioned markets.
Mechanism
The pricing and transfer of unquoted bonds typically occur through bilateral negotiations between institutional counterparties or via private blockchain networks. These instruments often possess specific characteristics, such as unique coupon structures, collateralized crypto assets, or custom smart contract terms, making them unsuitable for standardized public exchange listings. Their illiquidity necessitates specialized valuation methodologies.
Methodology
The strategic approach for institutions involves direct engagement with issuers and other qualified buyers to establish fair valuations for these illiquid digital debt instruments. This methodology relies on extensive due diligence, credit analysis of the underlying issuer or collateral, and potentially discounted cash flow models adapted for crypto-specific yield curves. It requires a robust internal infrastructure for private asset management and risk assessment, particularly given the lack of transparent market data and the bespoke nature of these tokenized financial products.
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