Notes to the consolidated financial statements of Aegon N.V.  Note 3 162 at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at  the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market  participant that holds the asset or owes the liability). Therefore, unobservable inputs reflect Aegon’s own assumptions about  the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are  developed based on the best information available. Aegon employs an oversight structure over valuation of financial instruments that includes appropriate segregation of duties. Senior  management, independent of the investing functions, is responsible for the oversight of control and valuation policies and for  reporting the results of these policies. For fair values determined by reference to external quotation or evidenced pricing parameters,  independent price determination or validation is utilized to corroborate those inputs. Further details of the validation processes are set  out below. Valuation of assets and liabilities is based on a pricing hierarchy, in order to maintain a controlled process that will systematically  promote the use of prices from sources in which Aegon has the most confidence, where the least amount of manual intervention exists  and to embed consistency in the selection of price sources. Depending on asset type the pricing hierarchy consists of a waterfall that  starts with making use of market prices from indices and follows with making use of third-party pricing services or brokers. When available, Aegon uses quoted market prices in active markets to determine the fair value of its investments in shares. Fair values  for unquoted shares are estimated using observations of the price/earnings or price/cash flow ratios of quoted companies considered  comparable to the companies being valued. Valuations are adjusted to account for company-specific issues and the lack of liquidity  inherent in an unquoted investment. Illiquidity adjustments are generally based on available market evidence. In addition, a variety of  other factors are reviewed by management, including, but not limited to, current operating performance, changes in market outlook and  the third-party financing environment. The fair values of investments held in non-quoted investment 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. The fair values of debt securities are determined by management after taking into consideration several sources of data. When  available, Aegon uses quoted market prices in active markets to determine the fair value of its debt securities. As stated previously,  Aegon’s valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and  third party pricing services. In the event that pricing is not available from these sources, 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. To understand the valuation methodologies used by third-party pricing services Aegon reviews and monitors the applicable  methodology documents of the third-party pricing services. Any changes to their methodologies are noted and reviewed for  reasonableness. In addition, Aegon performs in-depth reviews of prices received from third-party pricing services on a sample basis.  The objective for such reviews is to demonstrate that Aegon can corroborate detailed information such as assumptions, inputs and  methodologies used in pricing individual securities against documented pricing methodologies. Only third-party pricing services and  brokers with a substantial presence in the market and with appropriate experience and expertise are used. Third-party pricing services will often determine prices using recently reported trades for identical or similar securities. The third-party  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.  Annual Report 2013 Shares Real estate funds, private equity funds and hedge funds Debt securities 