Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Mark-to-Market Losses

What it is:

Mark-to-market losses are losses in an asset's value caused solely by a decline in market price.

How it works (Example):

Mark-to-market losses appear when an asset is priced according to a mark-to-market (MTM) accounting method. Under MTM, an asset's value is adjusted on a daily basis to reflect its market price. In other words, an asset experiences a mark-to-market loss if its market price falls from one business day to the next. For example, a mutual fund sustains a mark-to-market loss if its net asset value (NAV) falls from $1,200 at the end of trading on Monday to $1,100 at the end of trading on Tuesday.

Why it Matters:

Mark-to-market losses are similar to paper losses in the sense that they are unrealized losses. That is, a holder does not experience a capital loss because he or she has not actually sold units of the asset.