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.
