Risk-based margining

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In risk-based margining, the amount of collateral that must be deposited is calculated based on the total risk exposure of the entire account. The total risk exposure is determined from the price risk of both the derivatives and cash positions in the account. This calculation method reduces risk because the combination of positions is taken into consideration, and equal but opposite risks within the same account are offset against each other. This enables the market participant to achieve maximum security with a minimum of collateral on deposit.[1]