spread margin

spread margin
An adjustment made to the calculation of initial margin which takes account of offsetting risks in futures contracts. Within the SPAN system two types of spread margins are calculated. Dresdner Kleinwort Wasserstein financial glossary
1. An initial margin which is levied to account for the possibility of an adverse move in the relationship between two delivery dates. This is necessary as in the determination of the scanning loss this risk is ignored. Dresdner Kleinwort Wasserstein financial glossary
2. The inter-commodity spread credit takes account of the reduced risk of position which consists of long and short futures in different, but related contracts, e.g. Brent Crude/Gas Oil. The credit is deducted from the scanning risk. Dresdner Kleinwort Wasserstein financial glossary

Financial and business terms. 2012.

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