--%>

How does marking to market affect risk management

How does marking to market affect risk management in derivatives trading?

E

Expert

Verified

If instruments are exchange traded or liquid, then marking to market is straightforward. You just require knowing the most recent market-traded price. Obviously, this doesn’t stop you also saying what you consider the value to be, or the profit you expect to build up. After all, you presumably entered the trade since you thought you would make a gain.

   Related Questions in Financial Management

  • Q : Foreign exchange transactions among

    How are foreign exchange transactions among international banks settled?The interbank market is network of correspondent banking relationships, along with large commercial banks maintaining demand deposit accounts along with one another, known a

  • Q : Define an example to Hedge Define an

    Define an example to Hedge?

  • Q : Tool for international diversification

    Assess a home country's multinational corporations as tool for international diversification.In spite of the fact that MNCs have operations worldwide, their stock prices act very much like purely domestic firms. It is puzzling yet undeniable. Co

  • Q : Positive interest rates on bonds in a

    Would there be positive interest rates on bonds in a world with absolutely no risk (no default risk, maturity risk, and so on)? Why would a lender demand and a borrower be willing to pay, a positive interest rate in such a no risk world?

  • Q : Way to incorporate management goals

    Explain in brief the way to incorporate management goals into pro forma financial statements.

  • Q : Define International Finance

    International Finance: It is the branch of economics which studies the dynamics of exchange rates, foreign investment, and how such affect international trade. International finance activities aid organizations emp

  • Q : Mutual and stockholder-owned savings

    Compare and contrast mutual and stockholder-owned savings and loan associations.

  • Q : Kareem construction Show how Kareem's

    Show how Kareem's WACC would change if the tax rate dropped to 25 percent and the estimated cost of equity capital were based on a risk-free rate of 7 percent, a market risk premium of 8 percent, and a systematic risk measure or beta of 2.0.

  • Q : Illustrates an example of LIBOR Market

    Illustrates an example of LIBOR Market Model?

  • Q : Explain an example of Brownian motion

    Explain an example of Brownian motion, where it is used.