Margining

How does Margining work on Hxro Network / PepperDEX?

Dexterity is modularized collection of smart contracts that allow for the creation and exchange of any derivatives instrument. It is the key lego block of the Hxro Network derivatives exchange protocol.

With it, the Hxro Network maximizes capital efficiency for its users while maintaining user safety. On a fairly balanced portfolio of roughly equal notional values of longs and shorts, portfolio variance is typically very low, significantly reducing user maintenance margin requirements. Conversely, a portfolio with many directional positions, such as only longs and shorts, would be subject to increased maintenance margin requirements to account for increased variance. The reasoning behind this is that in a sufficiently balanced portfolio, the variances of longs and shorts net out, which cannot be said for directional-only portfolios, hence increased risk and increased margin requirements.

Important Formulae

• Initial margin: 3 * 1d_standard_deviation * order_size

• Maintenance margin: 3/2 * 1d_standard_deviation * order_size