How Does Cross-Margining Mitigate the Risk of a Sudden Margin Call? ⎊ Path

How Does Cross-Margining Mitigate the Risk of a Sudden Margin Call?

Cross-margining allows a trader to use the total collateral across all their derivative positions, even those on different assets, to meet the margin requirements for all positions collectively. If one position is losing money, the profit from another position can offset the loss, effectively reducing the overall margin required.

This diversification of collateral prevents a single losing trade from immediately triggering a margin call, providing a buffer against sudden price shocks.

Explain the Concept of ‘Liquidation Risk’ and How Cross-Margining Can Mitigate It

What Is the Difference between Portfolio Margining and Gross Margining for Derivatives?

How Does Portfolio Margining Differ from Standard Product Margining?

What Is ‘Cross-Margining’ and How Is It Facilitated by a Crypto Prime Broker?

Are There Regulatory Differences in Reporting Requirements for Trades Executed via Iceberg Orders versus in Dark Pools?

What Is ‘Cross Margin’ and How Does It Affect Margin Utilization across Multiple Positions?

What Is the Benefit of a Cross-Collateral System?

How Does Cross-Margining Reduce Capital Requirements for a Prime Brokerage Client?

Glossar

Margin Requirements

Definition ⎊ Margin requirements refer to the minimum amount of capital an investor must deposit and maintain with a broker or exchange to open and sustain a leveraged position in derivatives trading.

Portfolio Margining

Leverage ⎊ Portfolio margining within cryptocurrency derivatives represents a risk-based approach to collateralization, differing from static mark-to-market methodologies.