What Is the Benefit of MTM for a Long-Term Hedger?
The primary benefit of MTM for a long-term hedger is the elimination of credit risk. By settling losses daily, the hedger does not face the risk that their counterparty will default on a massive final payment.
While MTM creates cash flow volatility, the certainty that the hedge will perform as expected at expiration, guaranteed by the clearinghouse, is a significant advantage.
Glossar
Hedger
Action ⎊ A hedger, within cryptocurrency derivatives, fundamentally executes strategies designed to mitigate or neutralize price risk exposure.
MTM
Valuation ⎊ Market-to-Market, or MTM, within cryptocurrency derivatives represents the continuous recalculation of the profit or loss on open positions based on real-time market prices, a practice critical for risk management and collateralization.