The Margin-at-Risk (short: MaR) is a quantity used to manage short-term liquidity risks due to variation of margin requirements, i.e. it is a financial risk occurring when trading commodities. Similar to the Value-at-Risk (VaR), but instead of the EBIT it is a quantile of the (expected) cash flow distribution.
A MaR requires (1) a currency, (2) a confidence level (e.g. 90%) and (3) a holding period (e.g. 3 days). The idea is that a given portfolio loss will be compensated by a margin call by the same amount. The MaR quantifies the “worst case” margin-call and is only driven by market prices.
- ^Lang, Joachim; Madlener, Reinhard (September 2010). “Portfolio optimization for power pl ants: the impact of credit risk mitigation and margining”. Institute for Future Energy Consumer Needs and Behavior – Working Paper. Aachen, Germany. Retrieved 1 January 2016.
- ^Rösch, Daniel; Scheule, Harald (2013). Credit Securitisations and Derivatives Challenges for the Global Markets (2nd ed.). New York: Wiley. p. 286. ISBN 978-1-119-96604-3.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.