In addition, whereas SPAN is a standard used across the industry, each CCP is developing their own version of a VaR margining algorithm. Margin changing even though your position doesn’t.Not being able to simply estimate margin.However, there are some key issues that arise from a move from SPAN to VaR that you need to be aware of, for instance: Inter contract offsets for correlations between products.īoth of these are included implicitly within the VaR scenarios.Intra contract spreads for spreads between expiries.The advantage of using VaR is it removes the need for some of the complexity in SPAN, including: It is the most widely used margin algorithm for ETD products, but it is reaching end of life.īecause of this, CCPs and Exchanges are moving away from SPAN to VaR-based methodologies for margin calculation, for example:Įurex have already made the move with Prisma launched in May 2013 and extended to all products by December 2017.Īn LME project to make the move to VaR margin is well underway. If you trade futures and options you are probably aware of SPAN.
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