What Is the Primary Limitation of the SPAN Margin System?
The primary limitation is that SPAN is a grid-based system that uses pre-defined risk arrays, which may not capture all possible non-linear risk exposures, especially in highly volatile or complex options strategies. It relies on the clearing house's selection of stress scenarios, which might miss 'tail risk' events not included in the arrays.
Glossar
SPAN
Calibration ⎊ SPAN represents a risk management methodology, initially developed for options portfolios, now extended to cryptocurrency derivatives, focusing on the standardized measurement of market risk.
SPAN Margin
Calibration ⎊ SPAN Margin represents a risk-based margin requirement calculated using the Standard Portfolio Analysis of Risk model, initially developed for options portfolios but now extended to cryptocurrency derivatives.