Revaluing a position at current market prices and settling the change, usually daily. It stops losses from building up unseen.
Where you will meet it
Mark-to-market comes up in 17 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“A bank could otherwise hide a mark-to-market loss by moving a position to the book carried at cost, or pick the book with the lower capital charge, which is regulatory arbitrage.”
Credit Risk Transfer Mechanisms FRM Part I · Foundations of risk management
“As market values fell and ratings were cut, collateral calls and mark-to-market losses came at once.”
Derivatives FRM Part II · Credit risk measurement and management
“Let V be the mark-to-market value of the contract to you.”
Introduction to Derivatives FRM Part I · Financial markets and products
“The clearing house controls credit risk with initial margin and daily marking to market, so losers pay variation margin each day.”
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