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

^ Reucroft, Miles. "Portfolio Margining Risk vs. Reward". TABB Forum. Retrieved 14 December 2015.
^ "Portfolio Margining Risk Disclosure Statement" (PDF). optionsexpress.com. Charles Schwab. Retrieved 18 December 2015.

Financial risk and financial risk management

Categories

Credit risk	Consumer credit risk Sovereign credit risk Settlement risk Default risk Concentration risk Credit derivative Securitization
Market risk	Commodity risk (e.g. Volume risk, Basis risk, Shape risk, Holding period risk, Price area risk) Equity risk Valuation risk FX risk Margining risk Interest rate risk Inflation risk Volatility risk Liquidity risk (e.g. Refinancing risk, Deposit risk)
Operational risk	Operational risk management Business risk Model risk Reputational risk Country risk Political risk Legal risk
Other	Execution risk Profit risk Systemic risk Non-financial risk