Do Centralized Crypto Exchanges Use the Same Margin Calculation Methods as Traditional Exchanges?
Centralized crypto exchanges often use proprietary margin calculation methods that are inspired by traditional finance models like SPAN, but they are often simpler and more aggressive in allowing higher leverage. They must also account for the extreme volatility and 24/7 nature of the crypto market, often leading to more frequent and rapid liquidations.
Glossar
Centralized Crypto Exchanges
Custody ⎊ Centralized Crypto Exchanges function as custodians of digital assets, offering a regulated framework for storage and transfer, a critical component for institutional participation in cryptocurrency markets.
Margin Calculation Methods
Collateral ⎊ Margin calculation methods within cryptocurrency derivatives, options trading, and financial derivatives fundamentally address the risk exposure associated with leveraged positions, requiring an assessment of potential losses.
Exchanges
Platform ⎊ Exchanges serve as the primary platforms for trading cryptocurrencies, options, and financial derivatives.
Traditional Finance Models
Valuation ⎊ Traditional finance models, when applied to cryptocurrency derivatives, often necessitate adaptation due to the nascent nature of these markets and the unique characteristics of digital assets.