How Does the Exchange Determine the Percentage Difference between the Two Margins? ⎊ Path

How Does the Exchange Determine the Percentage Difference between the Two Margins?

The exchange determines the percentage difference based on the volatility and liquidity of the underlying asset, as well as the risk tolerance of the exchange itself. Higher volatility or lower liquidity leads to a larger buffer (a greater difference) between the initial and maintenance margin to reduce the risk of a deficit liquidation.

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