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What Is ‘Procyclicality’ in Margin Setting for Volatile Assets?

Margin requirements increase when volatility rises and prices fall, amplifying market downturns by forcing deleveraging and asset sales when resources are strained.
Greeks.Live23.11.25

What Is ‘Procyclicality’ in Margin Setting for Volatile Assets?

Procyclicality is the tendency for margin requirements to increase when volatility rises and asset prices fall, forcing market participants to post more collateral precisely when their financial resources are strained. This can amplify market downturns by forcing deleveraging and asset sales, further driving down prices.

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