Can Non-Linear Derivatives like Options Be Easily Cross-Collateralized?
Yes, options can be cross-collateralized, but their non-linear risk profile (due to Gamma and Vega) makes the risk calculation more complex than for linear products like futures. The margin required for an options portfolio must account for rapid changes in Delta and volatility exposure.
Exchanges use advanced risk models, often based on portfolio margining, to accurately assess the overall risk of the options and futures within the cross-collateralized account.
Glossar
Non-Linear Risk
Exposure ⎊ Within cryptocurrency derivatives and options trading, exposure to non-linear risk arises from the inherent mathematical properties of derivative contracts, particularly those exhibiting options-like behavior.
Non-Linear Derivatives
Derivation ⎊ Non-linear derivatives, within the context of cryptocurrency, options trading, and broader financial derivatives, represent pricing models and analytical techniques that deviate from the assumptions of linearity inherent in models like Black-Scholes.