Portfolio margin is a risk-based margining system that assesses the total risk of an investor’s entire portfolio rather than individual positions. This approach can result in lower margin requirements for diversified portfolios due to offsetting risks between different assets. It calculates margin based on the potential loss of the overall portfolio under various market scenarios. This method offers greater capital efficiency for experienced traders.
Context
Portfolio margin is frequently discussed in financial news, particularly in the context of derivatives trading, including cryptocurrency futures and options. Its application in digital asset markets allows participants to optimize capital utilization by accounting for correlations between positions. However, it also introduces complexities and necessitates robust risk management frameworks, which are subjects of ongoing regulatory scrutiny and exchange development.
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