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Portfolio Margin Calculation

KTX
Updated
The calculation of portfolio margin involves converting multiple asset types into a unified margin value to determine a user's available margin and leverage level. This calculation typically considers each asset's current market value, platform - specific conversion rates (or risk factors), and relevant risk management strategies. Below are the general calculation steps and an example:

 

Calculation Steps

 

  1. Determine Asset Market Value
    Calculate the market value of each asset by multiplying the asset quantity by its market price.
  2. Apply Conversion Rate
    Each asset has a specific conversion rate (or risk coefficient) based on its stability and liquidity. This rate typically ranges between 0 and 1, representing the platform's confidence in using the asset as margin.
  3. Calculate Margin Value of Each Asset
    Multiply the market value of each asset by its corresponding conversion rate to obtain its margin value.
  4. Sum Up Total Margin Value
    Add up the margin values of all assets to determine the total margin value of the account.

 

Example Calculation
Assume a user holds the following assets on a trading platform:

  • 2 BTC (Bitcoin), current price: $30,000/BTC
  • 10 ETH (Ethereum), current price: $2,000/ETH
  • 20,000 USDT (Tether), price: $1/USDT
The platform has set the following conversion rates:
  • BTC: 0.9
  • ETH: 0.8
  • USDT: 1.0

Calculation Steps:

  1. Determine Asset Market Values:

  • BTC Market Value: 2 × $30,000 = $60,000
  • ETH Market Value: 10 × $2,000 = $20,000
  • USDT Market Value: 20,000 × $1 = $20,000

  1. Apply Conversion Rates:

  • BTC Margin Value: $60,000 × 0.9 = $54,000
  • ETH Margin Value: $20,000 × 0.8 = $16,000
  • USDT Margin Value: $20,000 × 1.0 = $20,000
  1. Calculate Total Margin Value:
  • Total Margin Value = $54,000 (BTC) + $16,000 (ETH) + $20,000 (USDT) = $90,000

Summary

Through this calculation, the user's total margin value is $90,000, which serves as the basis for trading on the platform.

Actual Platform Calculations & Risk Management

In practice, trading platforms may employ more sophisticated margin calculations and risk management strategies, such as:

  1. Dynamic Conversion Rate Adjustments
  • Conversion rates may be adjusted based on market volatility and asset risk levels.
  1. Risk Limits & Alert Mechanisms
  • Platforms set risk thresholds, triggering warnings or automatic liquidation when margin value falls below these limits.
  1. Portfolio Risk Assessment
  • Platforms may evaluate asset correlations and adjust margin requirements based on the overall portfolio risk.

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