Schedule-Based Margin, in the context of crypto derivatives and institutional trading, refers to a method of calculating collateral requirements based on a predefined schedule of margin rates for various asset classes or contract types. Unlike more complex portfolio margin systems, this approach assigns a fixed percentage or amount of collateral for each position, simplifying risk calculation and standardization. It provides a transparent and predictable framework for managing leverage and counterparty risk.
Mechanism
The operational mechanism involves a static table or rule set that dictates the initial margin and maintenance margin for each crypto asset or derivative product. When a trader opens a position, the system automatically calculates the required collateral based on the scheduled rates and the position’s size. This calculation is performed irrespective of correlation benefits or netting across diverse positions, providing a conservative and straightforward margin assessment.
Methodology
The strategic application of schedule-based margin assists in simplifying risk management and regulatory compliance for crypto exchanges and institutional brokers. It offers a clear, predictable margin framework, making it suitable for less sophisticated derivatives or for jurisdictions with evolving regulatory clarity. While less capital-efficient than portfolio margining, it reduces computational complexity and operational overhead, fostering wider participation in institutional options trading and leveraged crypto investing through its clear risk parameters.
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