Why Is MTM Necessary Even for Physically-Settled Contracts? ⎊ Path

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 Difference between MTM and Final Settlement?

How Does MTM Reduce Counterparty Risk in Derivatives Trading?

What Is the Difference between Cash-Settled and Physically-Settled Futures?

How Does the Settlement Process Differ between Cash-Settled and Physically-Settled Futures?

How Does the Settlement Price Differ between Physically-Settled and Cash-Settled Futures?

How Does the Daily Mark-to-Market Process Impact the Cash Flow of a Futures Trader?

What Is the Role of the Settlement Price Index in Cash-Settled versus Physically-Settled Options?

What Is the Key Difference between Cash-Settled and Physically-Settled Futures Contracts?

Glossar

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.