  This paper provides intuition on the relationship of accrual and
mark-to-market valuation for cash and forward interest rate trades. Discounted
cashflow valuation is compared to spread-based valuation for forward trades,
which explains the trader's view on valuation. This is followed by Taylor
series approximation for cash trades, uncovering simple intuition behind
accrual valuation and mark-to-market adjustment. It is followed by the PNL
example modelled in R. Within the Taylor approximation framework, theta and
delta are explained. The concept of deferral is explained taking Forward Rate
Agreement (FRA) as an example.
