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.
Glossar
Portfolio Margining
Framework ⎊ Portfolio margining, within cryptocurrency derivatives and options trading, represents a sophisticated risk management technique that dynamically adjusts margin requirements based on the overall portfolio’s risk profile rather than individual positions.
Lower Margin Requirements
Leverage ⎊ Lower margin requirements in cryptocurrency derivatives trading represent a reduction in the capital needed to initiate and maintain a leveraged position, directly impacting trading capacity.
Margining
Collateral ⎊ Margining represents the process of adjusting the assets pledged as security for derivative contracts, reflecting changes in market risk and counterparty credit exposure.
Standard Portfolio Analysis of Risk
Quantification ⎊ Standard Portfolio Analysis of Risk, within cryptocurrency and derivatives, extends traditional asset allocation principles to encompass the unique characteristics of these markets, demanding a nuanced approach to risk measurement.