Margin Collateral Ratios

Margin collateral ratios define the proportion of different assets that can be used to back a leveraged position, often applying haircuts to more volatile assets. A haircut is a percentage reduction applied to the market value of collateral to account for potential price drops.

For example, a stablecoin might have a higher collateral value ratio than a volatile altcoin. These ratios are essential for maintaining the integrity of the margin system, ensuring that the total value of the collateral is sufficient to cover potential losses.

Platforms must continuously revalue these assets to ensure the ratio remains within safe parameters.