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Chapter 23: The Management of Positions > 23.8 Marking Positions to Market

23.8 MARKING POSITIONS TO MARKET

Mark to market is an accounting procedure by which assets are “marked”, or recorded, at their current market value, which may be higher or lower than their purchase price or book value. As a result of a mark-to-market calculation, all investments are valued in the dealing system at their current market value, and all profits and losses that result from price rises or falls are recognised on the day that they happen. This is accounting “best practice”. Consider the following example.

On 22 February, ABC Investment Bank carries out three trades in Megacorp plc:

1. It buys 10 000 shares at £10 each at 9am.

2. It buys an additional 10 000 shares at £9.50 each at 10am. At this point its position is 20 000 shares and its average price per share is £9.75.


  

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