• Corporate FX

Mark to Market Calculation for Forward Contracts

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Please kindly contact Jack Georgeson directly regarding all FX Forward Contract and Mark to Market Valuation Questions and Enquiries.

Phone: +44 (0) 203 854 6802

Email: jackgeorgeson@gsnfx.co.uk

Mark to Market Calculation for Forward Contracts

Mark to Market Calculation for Forward Contracts

Mark to Market Calculation for Forward Contracts

Do you currently revalue FX Forward contracts for monthly and annual financial reporting?

Does your current FX providers, brokers and banks provide valuation reporting?

Are you reviewing how the mark to market fair values are calculated?

Do mark to market losses and gains create significant adjustments to income statements and financial reporting?

Please reach out to us for a discussion.

Forward Contract Mark To Market Calculations

Manage FX Risk

Fluctuations and volatility in exchange rates can affect both business operating margins and the value of balance sheet assets and liabilities. As a result hedging products such as FX Forward contracts provide certainty for costs, income and balance sheet assets or liability values.

Mark to market calculations  provide a more accurate current value of FX hedges at specific times. They often though don’t reflect the true value of the FX contracts when realised at maturity.

Revaluing forward contracts executed in foreign currency FX crosses is often required when compiling monthly and annual financial reports. GSNFX provides a full range of foreign exchange risk management services and solutions. As part of this service, prompt mark to market calculations of forward hedging contracts can be organised at any time.

What Is Mark To Market?

MTM Forward Contract Valuations

Mark to market calculations (sometimes abbreviated to MTM calculations) are a method of measuring the fair value of an asset based on generally accepted market conditions.

Valuing FX Forward Contracts as of the rate originally secured doesn’t reflect the true value of the hedge based on the current market conditions. Therefore revaluing the contracts monthly or at year-end provides a more accurate market value.

What Are The Benefits Of Using Mark To Market?

MTM Benefits FX Hedging and Risk Management

Mark to market calculations deliver an accurate, time-based and current value of an FX Forward Contract. This is particularly important when dealing with multiple forward hedging contracts in a variety of foreign currency crosses. Under a forward contract, there is an obligation to buy or sell a currency cross at a specified price on a future date or over a period of time.

FX market volatility can have a significant impact on business costs and commercial margins. It can also impact the value of assets on balance sheets. Often a robust risk management process is essential to manage manage multiple exchange rate risks.

We provide MTM valuations promptly based on your individual needs which can be calculated at specific dates for monthly and year-end financial reporting.

 

Disadvantages of hedging with FX Forward Contracts

Negative Mark to Market Valuations

One of the key disadvantages of managing FX risk using forward contracts is that if the currency a forward contract is executed in dramatically fluctuates in a way that is favourable to you, you won’t be able to take advantage of the more advantageous rates.

Additionally, when monthly or annual mark to market calculations are used to revalue to FX contracts, the MTM values are negative. Ultimately, the benefits of protecting business and commercial margins using FX hedging strategies is likely to outweigh the downside of negative mark to market fair values and the inability to participate in favourable exchange rate trends.

If you are currently managing business FX risks using forward contracts or are considering implementing FX hedging for the first time, please get in touch with us by phone or email to discuss your needs.

We can support in all aspects of FX risk management and help with any queries you might have about MTM valuation reports when using FX Forward Contracts.

What Are The Alternatives?

The Risks of Not Managing Currency Exposure

Some companies will opt not to use FX Forward Contracts or similar tools to hedge currency exposures. In doing so they can avoid potential negative MTM revaluations on contracts secured.

It is incredibly difficult and speculative to use currency forecasts to plan business costs and margins. Exchange rate fluctuations are impacted by a broad multitude of factors ranging from market risk, interest rates, inflations, central bank forward guidance and economical fundamental data releases versus expectations.

Predicting future exchange rates is even harder over longer periods as a broad range of factors can all have a dramatic impact on exchange rate fluctuations. GSNFX helps businesses implement foreign exchange risk management strategies. Our standard service includes providing prompt mark to market calculations and reporting based on your specific needs.

How can Exchange Rate Volatility Impact Business Margins?

Securing FX Exposures

Fluctuating exchange rates can impact the cost of goods and services imported. They can also impact the value of global assets and liabilities on balance sheets and the profitability of international export contracts when conducting business in multiple currencies.

FX risk management is sometimes essential if a significant proportion of business turnover is received in foreign currencies and equally, if a material proportion of business costs are in global currencies. As a result, FX market fluctuations can have a material impact on corporate margins, revenue and costs.

At GSNFX, we specialise in currency exposure management, creating effective FX strategies that protect business operating margins. We support businesses across multiple industries including manufacturing, services, and information sectors. Please  get in touch to arrange a no obligation discussion.

What FX Risk Management Services Do GSNFX Provide?

FX Hedging Specialists

GSNFX founders have over 30 years of combined experience providing corporate foreign exchange risk management strategies for large corporations, limited companies, and everything in between. We help clients secure costs and reduce the impact of currency volatility.

Our broad range of techniques, products, and services can be tailored to suit your business and the specific currency risks that you are exposed to. We’ll help you develop and implement robust risk management techniques to ensure business currency exposures are managed effectively.

Protecting Business Margins

Securing Costs and Income

Protect your business against reduced margins and/or increased costs due to currency fluctuations with GSNFX’s tailored risk management solutions.

If you’re looking to minimise the impact of fluctuations on import costs and export income, please get in touch to arrange a conversation. Alternatively, visit our website to find out more about the range of services we provide.

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