Additional Margin is usually used as a coverall for Margin requested from Clearing Members when the CCP has a risk concern of some sort, but there isn’t currently an official margin component to cover it. For example, Additional Margin may be required if it is felt that a portfolio carries too much risk compared with the capital of the clearing member.
Additional Margin may be charged to cover specific risks such as:
- Liquidity Margin
- Default Margin – to cover any insufficiency in the size of the default fund
- Credit Margin – extra margin where a member has fallen below the required credit rating
- Model Risk – to cover potential issues with the formulas used within the algorithm, for example the option pricing model
- Wrong Way Risk Margin