Margining risk

Margining risk is a financial risk that future cash flows are smaller than expected due to the payment of margins, i.e. a collateral as deposit from a counterparty to cover some (or all) of its credit risk.[1] It can be seen as a short-term liquidity risk, a quantity called MaR can be used to measure it.

## Methodology

In order to decrease the risk of a counter party to default, a technique called portfolio margining is applied, which simply means that the assets within a portfolio are clustered and sorted by the descending projected net loss, e.g. calculated by a pricing model.[2] One can then determine for which cluster(s) one wants to perform margin calls.

## References

1. ↑ Reucroft, Miles. "Portfolio Margining Risk vs. Reward". http://tabbforum.com/opinions/portfolio-margining-risk-vs-reward. Retrieved 14 December 2015.
2. ↑ "Portfolio Margining Risk Disclosure Statement". Charles Schwab. http://images.optionsxpress.com/static/pdf/disclosure_and_acknowledgement.pdf. Retrieved 18 December 2015.

* v
* t
* e

Financial risk and financial risk management

Categories|

| Credit risk|

* Concentration risk
* Consumer credit risk
* Credit derivative
* Securitization

|

Market risk|

* Commodity risk (e.g. Volume risk, Basis risk, Shape risk, Holding period risk]], Price area risk)
* Equity risk
* FX risk
* Margining risk
* Interest rate risk
* Volatility risk
* Liquidity risk (e.g. Refinancing risk)

Operational risk|

* Operational risk management
* Legal risk
* Political risk
* Reputational risk
* Valuation risk

Other|

* Profit risk
* Settlement risk
* Systemic risk

Modeling|

* Market portfolio
* Modern portfolio theory
* RAROC
* Risk-free rate
* Risk parity
* Sharpe ratio
* Sortino ratio
* Value-at-Risk (VaR) and extensions Profit at risk, Margin at risk, Liquidity at risk

Basic concepts|

* Diversification
* Expected return
* Hazard
* Hedge
* Risk
* Risk pool
* Systematic risk
* Financial law

* Financial economics
* Investment management
* Mathematical finance

0.00

(0 votes)

Original source: https://en.wikipedia.org/wiki/Margining risk. Read more

|

Retrieved from "https://handwiki.org/wiki/index.php?title=Finance:Margining_risk&oldid=245704"
*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template