Why Is MTM Necessary Even for Physically-Settled Contracts? ▴ Learn

Why Is MTM Necessary Even for Physically-Settled Contracts?

MTM is necessary for physically-settled contracts for the same reason as cash-settled ones: to manage counterparty credit risk. While the final delivery is physical, the contract's daily change in value represents a financial gain or loss that must be settled daily in cash to ensure the financial integrity of the trading parties and the clearinghouse, preventing large defaults.

What Is the Main Difference between a ‘Cash-Settled’ and ‘Physical-Settled’ Option?

Explain the Difference between Physically-Settled and Cash-Settled Futures Contracts

What Is the Difference between Physically-Settled and Cash-Settled Crypto Options?

How Does a Cash-Settled Futures Contract Differ from a Physically-Settled One in This Context?