What Is a Benchmark for an ‘Adequately Sized’ Insurance Fund?

There is no single, fixed benchmark for an 'adequately sized' insurance fund, as the ideal size is dynamic and depends on the exchange's open interest, market volatility, and risk model. A common approach is for the fund to be large enough to cover the deficit from a 'worst-case' liquidation scenario (a stress test).

The fund's size should generally be proportional to the total open interest on the exchange.