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How Do Volatility-Based Margin Systems Work?

Volatility-based margin systems dynamically adjust the required margin based on the real-time or historical volatility of the underlying asset. When volatility increases, the system automatically raises the initial and maintenance margin requirements to reflect the higher risk of sudden price swings.

This mechanism helps to proactively manage systemic risk by demanding more collateral during unstable periods.

How Does the Volatility of the Underlying Asset Impact Collateral Requirements?
Why Do Brokers Increase Margin Requirements during Periods of High Market Volatility?
Why Does an Exchange Require a Higher Margin for a Larger Position?
Why Is a High Maintenance Margin Beneficial for Exchange Stability?