Mark to market updates the recorded value of a position to what it would fetch in the market today. Trading books, derivatives, and many investment portfolios use this approach so gains and losses show up quickly. It improves transparency when prices are reliable, but it can add earnings volatility. When markets freeze, fair value becomes harder to observe and models fill the gap. Cost accounting, by contrast, keeps historical purchase prices until sale or impairment.
Mark to MarketMTM
Mark to market means valuing an asset at its current market price rather than its original purchase cost.
Also called fair value accounting, MTM.
Related terms
- VolatilityHow much and how quickly a price moves up and down over a given period.
- Income StatementAn income statement shows a company's revenue, costs, and profit or loss over a defined reporting period.
- BondA loan to a government or company that pays interest and repays the principal on a set date.
- StockA unit of ownership in a company, giving the holder a claim on part of its assets and profits.