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Mark-to-market: Difference between revisions
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{{anat|isda|}}The value of an [[asset]] by reference to its [[market price]] — ie what folks are prepared to pay for it. | {{anat|isda|}}The [[market value]] is the value of an [[asset]] by reference to its [[market price]] — ie what folks are prepared to pay for it at the particular point in time, rather than by assessing the value of the fundamental components of the asset. The latter involves ineffable wisdom, technical analysis and cojones of steel — and at times of stress is apt to make an owner feel aggreived at the world; the former is a bit like sticking something on eBay — hence, “[[Mark to market|marking to market]]” — and yields an instant answer if not necessarily gratification. | ||
As long as the bid is “[[firm bid|firm]]”<ref>Meaning the person making the bid is prepared to trade at that price.</ref> and the market [[liquid]]<ref>Meaning there are lots of people in the market for that asset at that time</ref> then however estimable your fundamental valuation techniques, you can’t argue about a [[market value]]. | |||
There the temptation might be to [[mark-to-model]] — cue much jiggery pokery and [[opacity]], because you value your positions based on what your clever models — the same ones that did all that lovely [[backtesting]] — tell you. But [[Models.Behaving.Badly - Book Review|Models don’t always behave themselves, do they]]. Especially when they’ve been ginned up by self-interested credit derivative structurers or fanciful Enron employees. | There the temptation might be to [[mark-to-model]] — cue much jiggery pokery and [[opacity]], because you value your positions based on what your clever models — the same ones that did all that lovely [[backtesting]] — tell you. But [[Models.Behaving.Badly - Book Review|Models don’t always behave themselves, do they]]. Especially when they’ve been ginned up by self-interested credit derivative structurers or fanciful Enron employees. | ||