medium · FRM Part 2 Current Issues
The 'Denominator Effect' is most likely to cause which of the following secondary-market behaviors during a sharp public equity correction?
- A surge in 'LP-led' secondary sales of private credit interests at significant discounts to NAV.
- An immediate upward revaluation of private assets as they become more desirable relative to stocks.
- A decrease in the 'illiquidity premium' as more buyers enter the market to provide liquidity to distressed LPs.
- A massive inflow of capital into private credit as investors seek 'refuge' from public market volatility.
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