110 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V.  NOTE 3 specialists consider both qualitative and quantitative factors as  part of this analysis. Several examples of analytical procedures  performed include, but are not limited to, recent transactional  activity for similar debt securities, review of pricing statistics  and trends and consideration of recent relevant market events. The fair values of investments held in non-quoted investment  funds (hedge funds, private equity funds) are determined by  management after taking into consideration information  provided by the fund managers. AEGON reviews the valuations  each month and performs analytical procedures and trending  analyses to ensure the fair values are appropriate. When available, AEGON uses quoted market prices in active  markets to determine the fair value of its debt securities.  These market quotes are obtained through index prices or  pricing services. Credit ratings are also an important consideration in the  valuation of securities and are included in the internal process  for determining AEGON’s view of the risk associated with each  security. However, AEGON does not rely solely on external  credit ratings and there is an internal process, based on market  observable inputs, for determining AEGON’s view of the risks  associated with each security. The fair values of debt securities are determined by  management after taking into consideration several sources of  data. AEGON’s valuation policy dictates that publicly available  prices are initially sought from several third party pricing  services. In the event that pricing is not available from these  services, those securities are submitted to brokers to obtain  quotes. The majority of brokers’ quotes are non-binding. As part  of the pricing process, AEGON assesses the appropriateness of  each quote (i.e., as to whether the quote is based on observable  market transactions or not) to determine the most appropriate  estimate of fair value. Lastly, securities are priced using internal  cash flow modeling techniques. These valuation methodologies  commonly use the following inputs: reported trades, bids,  offers, issuer spreads, benchmark yields, estimated prepayment  speeds, and / or estimated cash flows. Only pricing services and  brokers with a substantial presence in the market and with  appropriate experience and expertise are used.  AEGON’s portfolio of private placement securities (held at fair  value under the classification of available-for-sale or fair value  through profit or loss) is valued using a matrix pricing  methodology. The pricing matrix is obtained from a third party  service provider and indicates current spreads for securities  based on weighted average life, credit rating, and industry  sector. Each month, AEGON’s asset specialists review the matrix  to ensure the spreads are reasonable by comparing them to  observed spreads for similar bonds traded in the market. Other  inputs to the valuation include coupon rate, the current interest  rate curve used for discounting and an illiquidity premium to  account for the illiquid nature of these securities. The illiquidity  premiums are determined based upon the pricing of recent  transactions in the private placements market; comparing the  value of the privately offered security to a similar public  security. The impact of the illiquidity premium for private  placement securities to the overall valuation is insignificant.  Third party pricing services will often determine prices using  recently reported trades for identical or similar securities. The  pricing service makes adjustments for the elapsed time from  the trade date to the balance sheet date to take into account  available market information. Lacking recently reported trades,  third party pricing services and brokers will use modeling  techniques to determine a security price where expected  future cash flows are developed based on the performance  of the underlying collateral and discounted using an estimated  market rate. Also included within the modeling techniques for  ABS – Housing, RMBS, CMBS and CDO securities are estimates  of the speed at which principal will be repaid over their  remaining lives. These estimates are determined based on  historical repayment speeds (adjusted for current markets)  as well as the structural characteristics of each security. The fair value of floating interest rate mortgages, policy loans  and private placements used for disclosure purposes is  assumed to be approximated by their carrying amount adjusted  for changes in credit risk. Credit risk adjustments are based on  market observable credit spreads if available, or management’s  estimate if not market observable.  For private loans, fixed interest mortgage and other loans  originated by the Group, the fair value used for disclosure  purposes is estimated by discounting expected future cash  flows using a current market rate applicable to financial  instruments with similar yield, credit quality and maturity  characteristics.  Debt securities  Mortgages, policy loans and private loans  (held at amortized cost) Each month, AEGON performs an analysis of the inputs  obtained from third party services and brokers to ensure that  the inputs are reasonable and produce a reasonable estimate of  fair value. AEGON’s asset specialists and investment valuation 