section{Marking-To-Market}From is because MTM has to deal

section{Marking-To-Market}From the marketing point of view in general we can say that Mark to market (MTM) is the measurement of fair value of accounts those can change over time, such as assets and liabilities. Basic nature of this measurement is, its dynamic. Mark to market aims at providing a realistic appraisal of an institution’s or company’s current financial situation.

Mark to market is an accounting practice that involves recording the value of an asset to reflect its current market values. Some properties regarding this context can be viewed as follow:egin{itemize}item As prices are not fixed, contracts may change over the time and that has to be recorded on regular basis. this changes lead to either profit or loss to the investors. This change also causes their accounts to be credited or debited from their margins accounts. Therefore, price change is a factor for MTM.item MTM is similar to commodity futures. This is because MTM has to deal with control and manage risks through hedging.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

item Interest rates rise or drop, there will be change in MTM.end{itemize}subsection{Example}As we know from our best, margin is the key to high profits. Suppose, if an investor agrees to a contract for some commodity at $20,000 and pay $1000 for right to take that position, the 100 is the margin. If the contract values goes to $21,000 then the profit is 100 Percent. But if the value of contract goes down to 19,000 then this will cause $1000 loss.

This change in margin values can also change the mark to market measurement.subsection{General Discussion}A general practice for most of the companies is that to estimate budget at the end of the fiscal year. To prepare this they must need annual financial statements which will reflect the current market value of their accounts. Also they need to determine the percentage of their loans and debt.

This decisions can be taken by using MTM measurement.


I'm Ruth!

Would you like to get a custom essay? How about receiving a customized one?

Check it out