Portfolio Margin Modeling

Portfolio margin modeling is an advanced risk assessment method that calculates margin requirements based on the net risk of an entire portfolio rather than the individual positions within it. It accounts for correlations between different assets, meaning that if two assets tend to move in opposite directions, the margin requirement for holding both may be lower than the sum of the requirements for each individual position.

This approach is more capital-efficient than traditional account-based margining, as it rewards diversification and hedging. It requires complex mathematical models to simulate potential loss scenarios across various market conditions.

By looking at the holistic risk of a portfolio, it provides a more accurate picture of the user's actual solvency risk.