Margin Model

The margin management system on Crypto Valley Exchange employs a Value-at-Risk (VaR) model with a 1-day period and 99% confidence level. This model requires traders to maintain sufficient collateral to cover the worst expected market exposure for one out of every 100 days, we will look back as far as there is good data to a maximum of 10 years depending on the instrument. Many instruments listed showed substantial volatility in the early years, this period will not be considered. A minimum data set of two years will be required to list the instrument OR a strong set of proxy data.

For instance, the listing plan includes a few strong tokens such as ARB and OP, these do not have enough data for listing individually, therefore for the extra period, we will build those scenarios using proxy data from highly correlated assets. This will be transparent and the methodology will be published.

To provide perspective, our risk model suggests leverage ranging from 5x to 9x for individual cryptocurrency positions. Hedging strategies on the Crypto Valley Exchange offer traders significantly higher leverage. For example, a balanced long position in Ethereum (ETH) and a short position in Bitcoin (BTC) can potentially extend leverage up to 15x.

In scenarios where opposite positions are held for the same underlying asset with different expiration times, leverage ratios can increase significantly. Where this comes into its own is for larger options portfolios where the delta of the portfolio is well hedged then a cost-effective book of options can be built with ratios reaching 1000x for a very well-hedged portfolio.

For commodities, the leverage varies, from 10x to significantly higher depending on the volatility of the commodity.

Preliminary Specifications

The information provided in this section regarding available contracts, margin/risk parameters, and fees on Crypto Valley Exchange represents our current vision and preliminary specifications.

We reserve the right to modify these parameters up to the main net release. Any changes will be driven by our commitment to support the protocol's and its users' best interests.

We strongly encourage readers to refer to our official communication channels for the latest updates and developments.

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