Mark-to-Market

Revaluing positions at current market prices to see where you stand right now in P&L and risk terms.

Explanation

Mark-to-market (MTM) means valuing all positions at today’s observable prices (often mid quotes), as if you were to unwind them now.

Your PnL and risk measures move with these marks, even if you do not trade — prices, spreads, and model updates all feed into MTM.

When prices are stale, illiquid, or model-based, MTM risk numbers can be misleading; errors propagate into limits, margin, and capital usage.

Engineering analogy: MTM is the system state estimate feeding the risk-control loop; biased or lagged measurements lead to poor control decisions.

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Interactive visualisation

Mark-to-market revalues a fixed position using prices. Changing the mark (mid, last, bid, ask) changes the reported P&L, even if you have not traded a single unit.

Mark: 101.00 (mid (quote centre))MTM P&L: 100.00Exec P&L: 60.00

Entry price (where position was opened): 100.00Mid price (current quote centre): 101.00Spread (ask − bid): 0.80Last trade price: 101.30Position (units, + long / − short): 100

Numbers

MTM P&L at chosen mark: 100.00

Executable P&L (unwind at bid/ask): 60.00

Optimism gap (MTM − executable): 40.00

Key variables

S_entry = entry price, S_mid = (bid+ask)/2

S_mark = price used for MTM, S_exec = realistic unwind level

Interpretation

Marking at mid or a stale last trade can make P&L look smoother and more positive than what you could actually realise by unwinding the position.

Executable P&L assumes an immediate liquidation at bid for longs or ask for shorts. The difference to MTM is the optimism gap, which grows with spread and position size. In control terms, MTM is a state estimate; using the bid/ask for marking is like designing that estimator to be conservative rather than optimistic.