How Does the “Stress Test” Factor into Portfolio Margin Calculations?
The stress test is a core component of portfolio margin, where the broker's system simulates various extreme market scenarios to determine the maximum potential loss of the entire portfolio. The margin requirement is then set to cover this calculated worst-case loss, ensuring the account has sufficient collateral to withstand severe market movements.
Glossar
Maximum Potential Loss
Exposure ⎊ Maximum Potential Loss (MPL) within cryptocurrency, options trading, and financial derivatives represents the theoretical worst-case financial detriment an investor could incur from a specific position or portfolio.
Portfolio Margin
Margin ⎊ The portfolio margin, within cryptocurrency derivatives and options trading, represents the aggregate collateral required to maintain open positions across an entire trading account, rather than on a per-contract basis.
Stress Test
Simulation ⎊ A stress test is a simulation technique used to evaluate the resilience of a financial institution or portfolio under extreme, adverse market conditions.