How Is the Margin Period of Risk (MPOR) Factored into Initial Margin Calculation?

The Margin Period of Risk (MPOR) is the estimated time required to close out or fully hedge a defaulting counterparty's position, typically assumed to be two to five days. Initial Margin models calculate the potential loss over this specific time horizon.

A longer MPOR assumes greater potential price movement, resulting in a higher Initial Margin requirement.