What Is Portfolio Margining and How Does It Differ from Standard Cross-Margining?

Portfolio margining is a more sophisticated method of calculating margin requirements based on the net risk of an entire portfolio of derivatives and underlying assets. Unlike standard cross-margining, which might simply offset long and short positions, portfolio margining uses advanced models to stress-test the entire portfolio under various market scenarios.

This provides a more accurate picture of the overall risk, often resulting in lower margin requirements for well-hedged portfolios. It treats the portfolio as a single, integrated position rather than a collection of individual ones.