TPG2022 Chapter X paragraph 10.180

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Pricing under each model will be sensitive to the assumptions made in the modelling process. Whatever valuation model is used, the evaluation of cost method sets a minimum fee for the guarantee (the minimum amount that the provider of the guarantee will be willing to accept) and does not of itself necessarily reflect the outcome of a bargain made at arm’s length. The arm’s length amount should be derived from a consideration of the perspectives (taking into account options realistically available) of the borrower and guarantor.

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