Mortgage Dictionary -> Market value
What is Market Value?
Market value can be generally defined as what the market will pay for a specific item. It is a generic term and can be narrowed down to specific products. Market value can be applied to anything. A rare baseball card has a market value today that will be different from what it was yesterday or will be next year.>
A stock or equity has a market value, which is when the bid and offer price is met. The seller wants to sell the stock at a particular price. The deal will be made when there is a buyer who is willing to meet that price.
Recently, the government went along with Wall Street and changed the Mark to Market rule (how much the equities are worth right now). It was changed in order to raise the value of the Toxic Assets (presently worthless assets) to unrealistic prices. These prices were those that can be hoped for in the future, with a better economy. But, a product cannot be sold on a hoped for future value, unless the buyer agrees that this will be the value in later years.
This is not Market value. The true value of the market is here and now. It is foolish to rate securities or any item, by what is thought to be its worth in the future, based on its original price. Prices go down, as can be witnessed by those who purchase securities or bonds.
When an individual sells anything, that person cannot set the rate at what it might be worth in the future. No person can predict that. Market value is the value of the moment or to put in technology terms, real time.
A government bond's interest rate or yield changes every minute. The price people are willing to pay for it at that minute, determines its yield. It is its Market value. Market value must be defined as the price at the present time. Otherwise, there can be no real value set because no one can predict the future and its past price is history. There is no Market value on anything that cannot be sold.