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Mark-to-market

Principles of Finance glossary · Principles Of Finance

Definition

The daily revaluation of a position at current market prices with corresponding cash settlement.

Mark-to-market in plain English

Mark-to-market means an account is re-valued every day at what its positions are actually worth in the market right now, and any gain or loss is settled in cash on the spot rather than waiting until you finally sell. So if your position gains value today, that profit is credited to your account today; if it loses, the loss is deducted today. It is like keeping a running scoreboard that pays out or collects at the end of each day instead of tallying everything at the very end of the game. This keeps small losses from quietly piling into one giant unpayable loss, since everyone stays squared up daily.

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