Derivatives margin refers to the collateral deposited by a participant in a derivatives contract to cover potential losses from adverse price movements. In cryptocurrency derivatives markets, this margin is typically held in digital assets and serves as a performance bond, ensuring that obligations are met. It acts as a risk management tool, protecting both counterparties and the exchange or protocol facilitating the trade. The amount required varies based on asset volatility, contract type, and regulatory stipulations.
Context
Derivatives margin requirements are a critical aspect of risk management in centralized and decentralized crypto exchanges. News frequently reports on changes in margin policies, often in response to market volatility or regulatory pressures. The ongoing conversation involves optimizing margin models to prevent liquidations while maintaining sufficient collateralization, particularly for new and complex derivative products.
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