How Does the Exchange’s Risk Engine Aim to Maximize the Residual Margin?
The risk engine aims to maximize residual margin by executing the liquidation order as quickly as possible and using sophisticated order types to minimize slippage. It often uses 'smart order routing' to find the best available price across different venues.
Crucially, it liquidates the position when the margin drops below the maintenance level, which is a buffer above the bankruptcy price, ensuring there is remaining collateral to capture as residual margin.
Glossar
Risk Engine
Calibration ⎊ A Risk Engine within cryptocurrency derivatives functions as a dynamic model, continually recalibrating parameters based on real-time market data and evolving volatility surfaces.
Sophisticated Order Types
Execution ⎊ Sophisticated order types represent algorithmic instructions beyond simple limit or market orders, designed to optimize trade execution and manage associated risks within cryptocurrency, options, and derivative markets.