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How Is the Risk-Based Margin for a Portfolio of Options Calculated?

Risk-based margin models, such as the widely used SPAN (Standard Portfolio Analysis of Risk) system, calculate margin based on the net risk of the entire options portfolio. It simulates potential gains and losses across a range of market scenarios.

The margin requirement is the maximum potential loss in the worst-case scenario. This method is more capital efficient than calculating margin for each option individually.

How Are Margin Requirements Calculated for Different Derivative Products?
How Is the Amount of Initial Margin Calculated by a Central Counterparty (CCP)?
How Does the “Stress Test” Factor into Portfolio Margin Calculations?
What Is the Formula for Calculating Initial Margin under a Standard Portfolio Margining Model?