A portfolio margin comparison, worked through.
Separate the calculation of a margin requirement from the arithmetic used to explain a portfolio benefit.
A portfolio margin number can differ from the sum of its standalone positions. Comparing the two helps explain the difference, but it does not tell you which offsets the clearing house permits or reproduce its risk model.
For actual model output, see the synthetic SPAN 2 calculation.
1. Start with comparable amounts
Assume two positions have standalone margin amounts of USD 80,000 and USD 40,000. Their sum is USD 120,000. Assume a separate portfolio calculation returns USD 90,000. Use the same currency, positions, valuation time, parameter cycle and account assumptions for both calculations.
- Standalone position A
- USD 80,000
- Standalone position B
- USD 40,000
- Sum of standalone margins
- USD 120,000
- Supplied portfolio margin
- USD 90,000
2. Calculate the difference
Subtract the portfolio margin from the standalone total: USD 120,000 minus USD 90,000 equals USD 30,000. Divide that difference by the standalone total: USD 30,000 divided by USD 120,000 equals 25%.
Compare two margin amounts
These illustrative USD amounts are supplied inputs, not exchange results. Change them to see the arithmetic. No portfolio is submitted or priced.
- Standalone total minus portfolio margin
- US$30,000.00
- Difference as a percentage of standalone total
- 25%
A negative result means the supplied portfolio margin exceeds the standalone total. This comparison does not establish that an offset is permitted by a CCP.
3. Explain what the comparison does and does not show
The 25% figure describes these supplied amounts. Actual margin depends on the methodology, positions, parameter files and applicable account rules. Some portfolios may have no benefit, and concentration or other model components can increase the requirement. Do not assume positions held at different CCPs offset each other.
A change in margin between yesterday and today is a different question. Prices, positions and risk parameters can all change. Hold the relevant inputs constant before attributing the movement to one cause.
Run the actual portfolio calculation
Cumulus9 accepts a portfolio through its API and returns results for supported margin methodologies. Start with the public quick start for request formats, authentication and response fields; confirm the required exchange, methodology and account configuration when arranging a trial.
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