What is Current Market Value - CMV
Within finance, the current market value (CMV) is the approximate current resale value for a financial instrument. Just as with any other object of value, the current market value offers interested parties a price for which they can enter into a transaction. The current market value is usually taken as the closing price for listed securities or the bid price offered for over-the-counter (OTC) securities.
BREAKING DOWN Current Market Value - CMV
Margin investing is a unique use case for the current market value measure. In a margin account, an investor essentially engages in owning securities purchased for a total price greater than the amount of cash he/she has in his/her account; the investor borrows the excess cash needed from his/her brokerage to fund the remainder of the purchase.
Due to this leveraged purchase situation, the brokerage account values the investor's assets periodically, and if the total account value falls below the required margin amount, the brokerage will require the investor to top up the account with cash or to liquidate some or all of his or her securities into cash. The current market value (CMV) is the standardized price that is taken periodically to track the change in the value of the investor's assets.
Current market value is generally closely related to financial market or instrument liquidity. In theory, markets or assets that enjoy "high" liquidity are believed to offer reliable price estimates. That is, an investor can enter into a transaction with a fair amount of certainty an advertised price will be close to the final or closing price of a transaction.
Assets on markets that are liquid will have reliable and realistic current market values, which encourages commerce and financial activity. In illiquid markets, current market values can deviate materially from actual prices parties are willing to transact at. For example, someone selling a home might think the current market value is close to an appraisal or neighboring comparables, but for a variety of reasons, if potential buyers are not interested, perhaps the listed current market value is out of touch.