Margin Multiplier

When it comes to margin multipliers, there is the margin number calculated by the margin algorithm, and then there is the number that is the actual requirement. This is because there are standard multipliers that are applied to the margin for particular accounts.

The most common multiplier is what used to be called the Speculator v Hedge multiplier, but now known as High Risk v Non High Risk, used by, for example, CME. A 1.1 multiplier is applied to the Initial Margin for High Risk accounts, meaning that the margin is 10% higher.

For OTC cleared products a higher margin is applied to client accounts. This is to allow for porting (moving positions to a new clearer following a default). The normal margin assumes a Holding Period of 5 days, but it might take 2 days to try and find a new clearer, and if this fails another 5 days will still be required to close out the position. Therefore the margin has to be scaled up to make it last for 5 days – generally this is achieved by multiplying the market risk parts of the client account margin by √(7/5).

Challenge Margin Calls With Margin Multipliers

Margin multipliers cause discrepancies in margin calculations, but it can be an opportunity for firms to contest margin calls with brokers. Learn how Margin Multipliers Can Be Used To Challenge Margin Calls.

We invite you to learn more and read more of our content. Explore our collection of Ebooks, such as our Margin Management Ebook . Explore a wide selection of blogs on our insights page, such as our blog on The Importance Of Forecasting Margin Requirements. Additionally, learn more about OpenGamma by watching our demo and taking a look at our product and solutions pages.