PRM - MTM vs Yield

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PRM - MTM vs Yield

Postby j.himanshi » Mon Nov 03, 2014 6:08 am

In market risk what is MTM and how MTM record losses when yield increases above at par by 10% and vice versa. What is the relation

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PRM - MTM vs Yield

Postby edupristine » Mon Nov 03, 2014 8:27 am

The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
For eg assume that 100 shares of a hypothetical stock ABC are bought at $50 on Day 1 and another 200 shares are purchased on Day 2 at $52.00.
Now, assume that the closing prices for XYZ on Days 1 and 2 are $50.50 and $51.50.
The MTM calculations are as follows:
Day 1
Transaction MTM - $50.00 ((50.50 – 50.00) * 100 )
Prior Period MTM - $0.00
Total MTM - $50.00
Day 2
Transaction MTM - ($100.00) ((51.50 – 52.00) * 200 )
Prior Period MTM - $100.00 ((51.50 – 50.50) * 100 )
Total MTM - $0.00

Total MTM : $ (50 +0) = $50

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