Marking change
Delta V = V_t - V_(t-1)The valuation change isolates how the marked position moved between two market states before other attribution items.
Foundations
Mark-to-Market
Revaluing positions at current market prices to see where you stand right now in P&L and risk terms.
Mental model
Mark-to-market translates current market conditions into today’s position value and risk.
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.
Explore the mechanism
How does today's executable market state change the value and risk of an existing position?
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
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
Sentry = entry price, Smid = (bid+ask)/2
Smark = price used for MTM, Sexec = 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.
UNDERSTAND
What to notice
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.
The quantitative structure
Notation
V_t- current value of the position
V_(t-1)- previous marked value
A small example
Revaluing a futures position
Yesterday's marked value was 250,000 and today's value is 243,500.
- Subtract the previous mark: 243,500 - 250,000 = -6,500.
- Record the 6,500 loss before separating fees, cash flows, or new trades.
ResultThe mark-to-market change is -6,500.
Where it appears
- daily derivatives valuation
- variation-margin calculation
- P&L and exposure monitoring
Where the intuition breaks
What this view leaves out
- A mark may be model-derived or based on thin quotes; it is not necessarily the price obtainable for liquidating the full position.
Where this concept sits
Follow the strongest prerequisites, applications, extensions, and contrasts.
Connections for Mark-to-Market
Mark-to-MarketYOU ARE HERE
Foundation ofP&L Explain and AttributionP&L explain begins from changes in marked values between valuation points.
Used byScenario and Stress EngineScenario analysis repeatedly marks positions under shocked market states.
UsesMarket Snapshots as BundlesMark-to-market requires a coherent set of market inputs captured at a defined valuation time.
Extended byXVA (CVA/FVA) MechanicsXVA adjusts clean mark-to-market value for counterparty, funding and related effects.
SupportsMargin and LeverageMark-to-market losses can change collateral and margin requirements and therefore effective leverage.
Foundation of · P&L Explain and Attribution
P&L explain begins from changes in marked values between valuation points.
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