The making of prices - How the valuation problem is solved on the market for the rating of structured finance products

How are prices made? From the perspective of economic price theory prices are determined by supply and demand, while from an economic sociology point of view they result from the embeddedness of market transactions in institutions, networks or cultural frames of meaning. In order to build a price, the value of a good has to be transformed into economic value, i.e. a price. The paper analyses the process of transformation from value to price on the market for the rating of structured finance products. On this market, with the help of calculative practices, the abstract value of "creditworthiness" is converted into a concrete rating which determines credit costs. As the subprime crisis has shown, the credit bureaus and rating agencies responsible for this translation process have not bean able to draw the price near to the value to which it refers. The article describes the divergence between value and price as the "social space" where price building is influenced by social factors that may distort prices and lead to a breakdown of the market.