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
In statistics and probability, quantiles are cut points dividing the range of a probability distribution into continuous intervals with equal probabilities, or dividing the observations in a sample in the same way. There is one fewer quantile th ...
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
''Margin Call'' is a 2011 American drama film written and directed by J. C. Chandor in his feature directorial debut. The principal story takes place over a 24-hour period at a large Wall Street investment bank during the initial stages of the ...
by the same amount.
The MaR quantifies the "worst case" margin-call and is only driven by market prices.
See also
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Liquidity at risk
*
Value at risk
Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by ...
*
Profit at risk
*
Earnings at risk
*
Cash flow at risk
References
{{Financial risk
Mathematical finance
Financial_risk_modeling
Monte Carlo methods in finance
Credit risk