Margin requirement represents the minimum amount of assets a client needs to have in their balance before engaging in margin trading. You can find the information on margin trading in the article Margin.
EXANTE uses an in-house risk management system, a variation of SPAN®, the Standard Portfolio Analysis of Risk to calculate a portfolio's margin requirement. The SPAN® methodology consists of a series of portfolio "what-if" scenarios that yield the worst possible performance loss a portfolio can suffer over a specific time horizon. To do this, SPAN® uses a predefined set of parameters reflecting the market conditions of traded contracts.
The general formula for the initial margin is:
Margin = max(Scanning Risk + Inter-month Charge – Inter-commodity Credit, Short Option Minimum, Concentration Margin)
To illustrate the EXANTE SPAN implementation, the following example portfolio is used:
By using a set of numerical values that indicate how a particular contract will gain or lose value under various conditions, the risk management system simulates 16 scenarios. Each condition is called a risk scenario. A typical set of scenarios may look as follows:
The system aggregates the resulting losses from the 16 scenarios for a given underlying asset (e.g., B.ICE), and the highest potential loss within these scenarios determines the margin requirement for the respective position.
To check the margin requirements for each instrument, use the EXANTE trading platform: right-click on an instrument and select "Instrument Info."
A leverage rate of 100% on accounts with margin trading turned off means that the full value of the position will be held as margin for that position.
Instrument info → Leverage rate
For accounts with margin trading enabled, the Required Margin will be displayed, indicating the amount of funds locked in margin for each share.
Instrument Info → Required Margin