Mark to model
the practice of pricing a position or portfolio at prices determined by financial models, in contrast to allowing the market to determine the price
Mark-to-Model refers to the practice of pricing a position or portfolio at prices determined by financial models, in contrast to allowing the market to determine the price. Often the use of models is necessary where a market for the financial product is not available, such as with
complex financial instruments. One shortcoming of Mark-to-Model is that it gives an artificial illusion of liquidity, and the actual price of the product depends on the accuracy of the financial models
used to estimate the price.
On the other hand it is argued that Asset managers and Custodians have a real problem valuing illiquid assets in their portfolios even though many of these assets are perfectly sound and the asset manager has no intention of selling them. Assets should be valued at mark to market prices as required by the Basel rules. However mark to market prices should not be used in isolation, but rather compared to model prices to test their validity. Models should be improved to take into account the greater amount of market data available. New methods and new data are available to help improve models and these should be used. In the end all prices start off from a model.
Hedge Funds
Hedge funds may use mark-to-model for the illiquid portion of their book.
This brief starts where responsible research should: with the source description of “Mark to model” as the practice of pricing a position or portfolio at prices determined by financial models, in contrast to allowing the market to determine the price. Everything that follows is an evidence route, not borrowed authority.
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The subject matters to the general reference register because the source frames it as the practice of pricing a position or portfolio at prices determined by financial models, in contrast to allowing the market to determine the price. Its deeper value depends on whether names, dates, institutions and citations support that framing.
Vocabulary and entity names are the principal evidence signals here, because they determine the precision of every later search. The source revision retrieved here is dated Dec 28, 2025. The linked authority identifier is Q6770534. None of the 0 selected statements returned an explicit reference.
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This entry incorporates text from “Mark to model” on English Wikipedia. Contributors are listed in the page history. Text is available under the Creative Commons Attribution-ShareAlike 4.0 License. Selected authority identifiers and statements are retrieved from Wikidata under CC0; their references and qualifiers remain part of the verification path.