How Do Portfolio Margining Systems Differ from Standard Cross-Collateralization?
Portfolio margining is a sophisticated system that calculates margin requirements based on the net risk of an entire portfolio, considering offsets and correlations between positions. It is often more capital-efficient than standard cross-collateralization, which simply pools collateral.
Standard cross-collateralization does not necessarily calculate the reduced risk from hedging, while portfolio margining actively seeks to lower margin requirements for well-hedged portfolios.
Glossar
Portfolio Margining Systems
System ⎊ Portfolio Margining Systems are the technological infrastructure and regulatory frameworks implemented by exchanges and clearing houses to calculate margin requirements based on the aggregate risk of a trader's entire portfolio, rather than on a position-by-position basis.
Standard Cross-Collateralization
Mechanism ⎊ Standard cross-collateralization within cryptocurrency derivatives represents a risk management protocol where collateral posted for one position can simultaneously secure exposures across multiple correlated assets, optimizing capital efficiency for traders and institutions.
Portfolio Margining
Framework ⎊ Portfolio margining, within cryptocurrency derivatives and options trading, represents a sophisticated risk management technique that dynamically adjusts margin requirements based on the overall portfolio’s risk profile rather than individual positions.