Rules-Based Margin is a system for calculating and enforcing collateral requirements in cryptocurrency trading based on predefined, deterministic criteria and fixed parameters, rather than dynamic risk assessments. This approach offers predictability and clarity in margin calls and position management.
Mechanism
It operates using a set of explicit, hard-coded rules that specify margin percentages for different asset classes, leverage levels, or derivative types. These rules are often implemented as smart contract logic or within centralized exchange systems, automatically adjusting margin balances and triggering liquidations when predefined thresholds are breached.
Methodology
The strategic advantage of rules-based margin lies in its simplicity, transparency, and ease of auditability, which can be particularly suitable for institutional options trading and Request for Quote environments. This framework provides clear, consistent operational guidelines for managing counterparty risk and ensuring systemic stability, though it may be less capital-efficient than dynamic risk-based approaches.
Portfolio margin dynamically assesses net risk for capital efficiency, while strategy-based margin applies fixed rules to individual options strategies.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
