Cross-Margin Models

Cross-margin models allow traders to use their entire account balance as collateral for multiple open positions. This approach increases capital efficiency, as gains from one position can offset losses from another, reducing the likelihood of a liquidation.

However, it also increases the risk that a loss in one position could deplete the entire account, leading to the liquidation of all open positions. This model is commonly used in professional-grade trading environments where traders manage complex portfolios.

It requires sophisticated risk management, as the trader must monitor the overall health of the account rather than individual positions. The protocol must implement robust checks to ensure that the aggregate risk of the account does not exceed the collateral value.

Cross-margin models provide greater flexibility but require a higher level of user expertise. They are a core feature of advanced decentralized derivative exchanges that aim to mimic the functionality of traditional prime brokerage services.