Cme pc span12/29/2022 At the time they began developing SPAN, methods for calculating margin requirements did not accurately capture the true risk for a combined portfolio of futures and options. Rick Kilcollin was the chief economist and David Emanuel the senior economist, in the CME's research department. The numeric value for each risk scenario represents the gain or loss that that particular contract will experience for a particular combination of price (or underlying price) change, volatility change, and decrease in time to expiration. Each condition is called a risk scenario. The core of the methodology is the SPAN risk array, a set of numeric values that indicate how a particular contract will gain or lose value under various conditions. SPAN evaluates overall portfolio risk by calculating the worst possible loss a portfolio of derivative and physical instruments might incur over a specified period (typically one trading day.) It does this by computing the gains and losses the portfolio would incur under various market conditions. SPAN thus provides for offsets between correlated positions and enhances margining efficiency. The SPAN method calculates the likely loss in a portfolio of derivatives positions and sets this value as the initial margin payable by the firm holding the portfolio. It was the first system to calculate performance bond requirements exclusively on the basis of overall portfolio risk at both the clearing and the customer level. It was developed in 1988 by economists at the Chicago Mercantile Exchange. SPAN, or Standard Portfolio Analysis of Risk, is a method of evaluating risk and calculating performance bond requirements for futures and options on futures.
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