Settled to market

Derivative instruments.

(STM).

A settled to market (STM) derivative instrument is one under which the 'losing' counterparty is required to make periodic payments, usually daily, of the amounts by which the instrument is 'out of the money' for them.

This arrangement mitigates counterparty credit risk for the 'winning' counterparty under the derivative contract.

See also

• Collateral
• Collateralized to market
• Counterparty
• Credit risk
• Derivative instrument
• Mark to market
• Market value
• Out of the money