What is Extreme Loss Margin (ELM), and Adhoc margins, Value at Risk (VAR)?

Extreme Loss Margin (ELM): CubePlus implements Extreme Loss Margin (ELM) as an additional safeguard. This margin is charged by exchanges on top of regular margin requirements and is designed to cover the risk of losses beyond what is predicted by VAR models. ELM is a fixed percentage of the contract value, applicable to both buy and sell positions.

Adhoc Margins: At TradeJini, we may apply Adhoc margins as an extra layer of protection. These margins can be imposed by exchanges on market participants in specific situations where there’s a perceived higher risk of default, increased volatility, or other market conditions that could lead to elevated losses. Adhoc margins are typically added to the standard margin requirements, aiming to safeguard the market and its participants from unexpected risks.

Value at Risk (VAR): TradeJini uses Value at Risk (VAR), a statistical measure in risk management. It estimates the potential loss in the value of a portfolio of assets due to market movements over a specific time period, ensuring a certain level of confidence. VAR is a crucial tool in financial risk management, helping us gauge a portfolio’s potential downside risk.