How Does the SPAN Margin System Facilitate Portfolio Margining?
The SPAN (Standard Portfolio Analysis of Risk) system is a standardized margin methodology used by many exchanges and CCPs. It facilitates portfolio margining by calculating the total risk of a portfolio (including futures, options, and swaps) based on various hypothetical market scenarios.
It nets the risk and provides a single, consolidated margin requirement that reflects the portfolio's overall risk profile.
Glossar
SPAN Margin System
Framework ⎊ The SPAN Margin System, initially developed for traditional options markets, represents a risk-management methodology adaptable to cryptocurrency derivatives, addressing the unique volatility and liquidity characteristics inherent in these assets.
SPAN Methodology
Framework ⎊ The SPAN Methodology, or Standardized Portfolio Analysis of Risk, is a globally recognized, portfolio-based risk management framework used by numerous exchanges and clearinghouses to calculate initial margin requirements for derivatives.
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.
Standardized Margin Methodology
Framework ⎊ Standardized Margin Methodology refers to a uniform, transparent set of rules and computational procedures adopted by a clearing house or across a market segment for calculating margin requirements across all participants and products.
Consolidated Margin Requirement
Computation ⎊ The consolidated margin requirement represents the single, net collateral amount demanded by a clearing organization to cover the potential future exposure of a portfolio encompassing multiple derivatives positions.