Is There a Standard Formula for Adjusting Margin Based on Volatility?

While there is no single, universally standardized formula, exchanges typically use quantitative risk models that incorporate measures of historical and implied volatility, such as a GARCH model or a VaR (Value at Risk) model. These models provide a statistically robust way to calculate the required margin.

The resulting margin requirement is a function of the volatility, the size of the position, and the desired confidence level for covering losses.