DAILY MARK-TO-MARKET VALUATIONS

DerivActiv provides daily mid-market valuations for interest rate swaps, foreign currency swaps, equity swaps and other derivative instruments. These values can be used to meet FASB Statement 133 and GASB standards, identify trends, and spot potential opportunities or risks.

WHAT IS MARK-TO-MARKET VALUATION?

Mark-to-market is an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments. For example, the final value of an interest rate swap that expires in 30 years will not be known until it expires. If it is marked-to-market, for accounting purposes it is assigned the value a counterparty is willing to transact at the open market currently.

Section 475 Internal Revenue Code contains the mark-to-market accounting method rule. Section 475 provides that dealers that elect mark-to-market treatment shall recognize gain or loss as if the property were sold for its fair market value on the last business day of the year, and any gain or loss shall be taken into account in that year.

Related to mark-to-market valuation is the effect of the issuance of FASB Statement No. 157 and its definition of fair value. FAS 157 defines fair value as: “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

Under FAS 157 the asset or liability is equal to the exit price, not necessarily the value on the mark-to-market statement from the financial institution providing the statement. DerivActiv adjusts periodic mark-to-market values to incorporate nonperformance risk as required under FAS 157.

LISTEN TO MUNIMARKET PULSE™
Podcasts of DerivActiv, LLC serve as a platform for top municipal professionals to speak directly to the issuers, advisors, and other municipal finance professionals in the broad municipal marketplace. Tune in each week as Johan Rosenberg, CEO of DerivActiv asks the pertinent questions in exclusive interviews with different prominent municipal finance professionals.

DerivActiv is a leading provider of independent mid-market valuations on derivatives and other financial instruments. For more information, call us at 866-200-9012 or click here to request a free demonstration .

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