For example, if a position in the portfolio is netting a positive return, then it could offset the liability of a losing position in the same portfolio. This would reduce the overall margin requirement that is necessary for holding a losing derivatives position.
Portfolio margin requirements have only been recently instituted in the options market, although futures traders have enjoyed this system since 1988. This revised system of derivative margin accounting has freed up millions of dollars in capital for options investors that previously was required for margin deposits under the old strategy-based margin requirements that were instituted in the 1970s.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Margin (finance) — For the 2011 film, see Margin Call. In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange). This risk can… … Wikipedia
Modern portfolio theory — Portfolio analysis redirects here. For theorems about the mean variance efficient frontier, see Mutual fund separation theorem. For non mean variance portfolio analysis, see Marginal conditional stochastic dominance. Modern portfolio theory (MPT) … Wikipedia
SPAN Margin — Short for standardized portfolio analysis of risk (SPAN). This is a leading margin system, which has been adopted by most options and futures exchanges around the world. SPAN is based on a sophisticated set of algorithms that determine margin… … Investment dictionary
Constant proportion portfolio insurance — (CPPI) is a capital guarantee derivative security that embeds a dynamic trading strategy in order to provide participation to the performance of a certain underlying asset. See also dynamic asset allocation. The intuition behind CPPI was adopted… … Wikipedia
Contribution margin-based pricing — maximizes the profit derived from an individual product, based on the difference between the product s price and variable costs (the product s contribution margin per unit), and on one’s assumptions regarding the relationship between the… … Wikipedia
Standard Portfolio Analysis of Risk — ( SPAN) A method of calculating initial margin by evaluating portfolio risk under a number of scenarios. LIFFE use SPAN to calculate initial margin for all contracts. Originally developed by the Chicago Mercantile Exchange ( CME). LIFFE … Financial and business terms
Dollar safety margin — The dollar equivalent of the safety cushion for a portfolio in a contingent immunization strategy. The New York Times Financial Glossary … Financial and business terms
dollar safety margin — The dollar equivalent of the safety cushion for a portfolio in a contingent immunization strategy. Bloomberg Financial Dictionary … Financial and business terms
Collateral management — Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party in a trade. Collateral management began in the 1980s, with Bankers Trust and Salomon Brothers taking collateral… … Wikipedia
Futures contract — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond … Wikipedia