Margin

Margin requirements are set on a pool by pool basis. They govern how much collateral is required to be deposited into the pool by each party to open and maintain positions. Margin is recomputed in realtime, and going below margin requirements may trigger auto-liquidation (depending on if this param is set to true).

Initial Margin and Maintenance Margin

• Initial Margin (IM): The amount of collateral required to open new positions.

• Maintenance Margin (MM): The amount of collateral required to maintain existing positions. Going above 100% MM usage may cause liquidations.

Portfolio Margin vs Simple Margin

Variational supports both portfolio margin and simple margin mode. In addition, our margin engine is fully compatible with the Deribit margin engine, meaning that all of the calculations work the same way.

Crypto Futures and Options Exchange - Deribit

Deribit portfolio margin calculations

Deribit Margin Requirements CalculationTSLab

Deribit simple margin calculations

There is one extra parameter that Variational supports in the portfolio margin params. decorrelation_risk tunes how much risk can be offset from positions with two different underlyings.

Specifically, we compute margin requirements in two scenarios:

1. All assets have zero correlation (mm_no_correlation)

2. All assets have 100% correlation (mm_complete_correlation)

The final margin requirement is

decorrelation_risk * mm_no_correlation + (1.0 - decorrelation_risk) * mm_complete_correlation

Per Asset Params

Default params are applied to every asset in the pool. You can set per asset params which will override the defaults for a specific asset. For example, if you set params for BTC, all options, futures, and perps with BTC as the underlying will be affected. All derivatives that do not have BTC as the underlying will use the default params.