Skip to main content
6 votes

MVA, initial margin valuation adjustment for derivatives

The name initial margin is somewhat misleading as initial margin is dynamic i.e it is adjusted through time. So, as you say, on day zero, it can be computed as a 10 day VaR VaR(10, t0). But, on day ...
user25205's user avatar
5 votes

Operational aspects of repo funding trades

I believe the example is merely for illustrative purposes. You shouldn't be able to fully fund a position in real life. The funding of (repo) and the bond purchase need not be with the same ...
AlRacoon's user avatar
  • 6,642
5 votes

Mark to market forward contract

There are two types of contract (a) a forward contract and (b) a futures contract. In (a) there is no payment of margin on a daily basis. Its value is $(F_1-F_0)e^{-r(T-t)}$ as you describe. In (b) ...
dm63's user avatar
  • 17.3k
5 votes

Why does buying future options require margin?

This page explains why you need a margin: http://www.cmegroup.com/education/a-primer-on-margining-styles-for-options.html Improvements: Futures options, as well as futures margins, are governed by ...
AK88's user avatar
  • 1,850
4 votes

Why does buying future options require margin?

It has already been answered why margin exists and roughly how it calculated. "Options on futures employ an entirely different method known as SPAN margining", which is basically CME Group's take on a ...
David Addison's user avatar
4 votes

Why does buying future options require margin?

The answer given by AK88 is good. To put it in simpler terms it is because a "futures account" (holding futures and options on futures) works differently from a "stock account" holding stocks and ...
Alex C's user avatar
  • 9,382
4 votes

% Drawdown on Stock Portfolio to hit Margin Call

Define CoL = cash or loan (cash if positive, loan if negative) MVL = market value of long positions MRP = Maintenance Margin Requirement fraction (=0.3) NetLiq = liquidation value (aka total ...
Alex C's user avatar
  • 9,382
3 votes
Accepted

Operating Leverage Interpretation

Operating leverage $k$: $$k=\frac{Quantity*(Price-AVC)}{Profit}$$ but profit (actually operating profit) is: $$Profit=Quantity*(Price-AVC)-FixOpCosts$$ If quantity sold increases by $a\%$ then our new ...
emot's user avatar
  • 886
3 votes
Accepted

short squeeze basic questions

Is there a way to find out what the critical price of the stock approximately is at which point most shares were sold short? Not that I am aware of, however, there is a way to find the Daily Short ...
amdopt's user avatar
  • 4,348
2 votes

% Drawdown on Stock Portfolio to hit Margin Call

At a 43% draw your excess liquidity hits zero and you get a margin call. Cash = -400,000 (400k margin loan) Securities = 571,428.60 @ ~43% drawdown Net Liquidation Value = 174,428.57 (Cash + ...
amdopt's user avatar
  • 4,348
2 votes

Comparing account equity vs maintenance margin on large number of positions

I don't actually know the answer to this question but the problem you describe is just a linear algebra problem. Imagine a matrix X whose rows represent the ordered ...
Attack68's user avatar
  • 10.9k
2 votes

Funded equity collars and margin loans

Further, a key element is overlooked in these answers. Although the share pledge under the collar transaction does eliminate most of the credit risk borne by the investment bank - it is still a loan. ...
Anonymous's user avatar
2 votes

Funded equity collars and margin loans

There is no credit risk because the client pledges the underlying shares as collateral to the funded collar. This is not explained in the article. The structure is built in such a way that the value ...
Ivan's user avatar
  • 1,396
2 votes
Accepted

Why do some exchanges require clearing participants to post margins for cash products?

The JSCC requires Margins to be posted for unsettled contracts As is explained here. Initial Margin for Cash Products In order to cover exposures for cash products, JSCC calculates the daily initial ...
Ami44's user avatar
  • 828
2 votes
Accepted

Understanding daily installment in futures

MTM is really just bookkeeping. You hold some initial margin for your book with a broker and each day your account value is updated per end of day futures values as $F_t - F_{t-1}$ for each position. ...
Chris's user avatar
  • 1,643
2 votes

Textbook about methodologies for computing margins (TIMS and SPAN)

There are many margins, you have to be more specific. Are you interested in CCP (Counterparty Clearing House) margin, OTC products margin? The former are CCP-specific, and the latter are governed by ...
danp's user avatar
  • 116
1 vote
Accepted

How the margining system worked in this situation?

The margin system for futures is a two level system. Each Broker has some capital (required in order to stay in business) and the Clearing House has some reserves as well. The Oct87 event that Hull ...
nbbo2's user avatar
  • 11.5k
1 vote

Question about Pattern Day Trading

If you have \$26k, and no positions on, your maintenance excess is \$26k, so your day trading buying power, DTBP, is \$26k * 4 = \$104k in DTBP. You are confusing account minimum with maintenance ...
Bikenfly's user avatar
  • 454
1 vote
Accepted

price alignment interest on future contract

This blog post might help: https://theotcspace.com/content/price-alignment-interest-pai#:~:text=PAI%20is%20the%20overnight%20cost,a%20CCP%20such%20as%20SwapClear. Futures are settled daily, and thus ...
Felix's user avatar
  • 206
1 vote

Delta one trading: dependence on repo rate?

For an individual stock, the repo rate IS the interest rate r contained in the formula for the forward price. For example, suppose you are trying to replicate a forward contract by holding the stock. ...
dm63's user avatar
  • 17.3k
1 vote
Accepted

ISDA SIMM swap sensitivities

Usually, zero curves, that is curves of zero rates are constructed from market instruments having corresponding market rates. For example, a 3M curve will be constructed from 3M instruments. The SIMM ...
byouness's user avatar
  • 2,230
1 vote
Accepted

Classifying groups of stocks beyond Market Cap/Industry/Sector

You could always turn to unsupervised machine learning and apply hierarchical clustering and then plot the relationships using a dendrogram. There is a cool portfolio optimization paper that uses ...
Jacques Joubert's user avatar
1 vote

Does margin trading affect market price?

Buying or selling a CFD only indirectly affects the underlying assets’s price through the CFD issuer’s hedging activity. The feedback effect is not deterministic and unlikely to be noticeable for ...
LocalVolatility's user avatar
1 vote

MVA, initial margin valuation adjustment for derivatives

Unlike VM which covers MtMs , IM covers close-out risk (2 weeks portfolio volatility)., it is dynamic , and required for major OTC users (see BCBS IOSCO 2015 ) i.e top up segregated account if need be ...
DKK's user avatar
  • 250
1 vote

Calculating required funds on Futures trades

Some exchanges do provide their historic margin requirements. For CME: http://www.cmegroup.com/clearing/risk-management/historical-margins.html Caveat for above link is that this is the margin ...
lostlostlostlostlost's user avatar
1 vote

Mechanics of futures contracts: with respect to which time reference is the variational margin calculated?

Immediately as the trade is confirmed. It will be the difference of the value of the contract when you sold it, minus the value when you bought it. The quotes at these points in time don't matter, ...
ThatDataGuy's user avatar

Only top scored, non community-wiki answers of a minimum length are eligible