The Margin-at-Risk (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. It is similar to the Value-at-Risk (VaR), but instead of simulating EBIT it returns a quantile of the (expected) cash flow distribution.
To do so, 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.[1]
The MaR quantifies the "worst case" margin-call and is only driven by market prices.[2]
^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.
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