Why Are Margin Offsets Typically Limited across Different Asset Classes?
Margin offsets are limited across different asset classes (e.g. equity options vs. commodity futures) because the correlation between them is generally lower and less stable than within a single asset class. During market stress, these correlations can change unexpectedly (flight to quality), increasing the risk of the offset failing.
Regulators and CCPs impose limits to ensure the margin remains prudent.
Glossar
Different Asset Classes
Volatility ⎊ Cryptocurrency asset classes introduce unique volatility profiles, differing substantially from traditional equities or fixed income; this stems from nascent market structure, regulatory uncertainty, and often lower liquidity, demanding sophisticated risk parameterization.
Margin Offsets
Concept ⎊ Margin Offsets represent the reduction in a portfolio's total initial margin requirement achieved by recognizing the risk-mitigating effects of holding correlated, but opposing, positions.