In the world of finance, the concept of derivatives is a crucial one to understand. Essentially, derivatives are financial instruments that derive their value from underlying assets. When it comes to trading derivatives, there are certain requirements that traders must adhere to, such as initial margin requirements. These requirements are determined by calculating the 99% value at risk over a two-day time horizon, using the standardized portfolio analysis of risk (SPAN) method. This allows for a more accurate assessment of potential risks, ensuring that traders are adequately prepared for any potential market fluctuations.
