How Does MTM Differ from the Settlement Process for a Forward Contract?
MTM involves the daily cash settlement of profits and losses, whereas a forward contract typically settles only once at the contract's maturity date. A forward contract does not usually require a margin account or a clearinghouse, meaning the full gain or loss is realized at expiration, introducing higher counterparty credit risk than a futures contract.
Glossar
Mtm Cash Flow
Settlement ⎊ Mtm cash flow, or Mark-to-Market cash flow, represents the daily or intraday transfer of funds between counterparties based on the change in the fair value of an open derivatives contract.
Crypto Financial Instruments
Derivatives ⎊ Crypto financial instruments, within the context of cryptocurrency markets, represent contractual agreements whose value is derived from an underlying asset ⎊ typically a cryptocurrency, but increasingly encompassing indices or even real-world assets tokenized on a blockchain.
Mtm Application in Crypto
Valuation ⎊ Mtm Application in Crypto is the continuous process of re-Valuation of all open derivatives positions based on the prevailing market price of the underlying cryptocurrency asset.
Standard Forward Contract
Definition ⎊ A standard forward contract is a customized agreement between two counterparties to buy or sell an asset at a predetermined price on a future date.
Securities Vs Crypto Mtm
Comparison ⎊ The comparison between securities and crypto mark-to-market (MTM) highlights fundamental differences in valuation frequency, liquidity assumptions, and regulatory oversight.
Continuous Mtm Simulation
Valuation ⎊ Continuous Mark-to-Market (MtM) simulation involves the real-time calculation of a derivatives portfolio's value based on current market prices.
Regulated Derivatives MTM
Definition ⎊ Regulated derivatives Mark-to-Market (MTM) refers to the mandatory daily valuation of open positions in financial derivatives, including those based on cryptocurrencies, according to established regulatory frameworks.
Futures Contract Forward Price
Pricing ⎊ The Futures Contract Forward Price represents the agreed-upon rate for the purchase or sale of a cryptocurrency at a specified future date, as stipulated by the terms of the derivative agreement.
Forward Contract Pricing
Formula ⎊ Forward Contract Pricing establishes the theoretical no-arbitrage price for a future transaction by adjusting the current spot price of the underlying cryptocurrency by the cost of carry.
Mtm Application in Digital Assets
Volatility ⎊ The application of MTM in digital assets is crucial due to the extreme volatility inherent in cryptocurrency markets.