What is Bullish Portfolio Margining

• SPAN-Like Approach: The Margin Requirement (MR) is computed using a methodology similar to CME SPAN. The portfolio is subjected to a range of stress scenarios, and the margin is set to cover the worst-case loss identified across all tests.

• Intra-Asset Netting: Netting of positions is permitted between instruments that share the same underlying asset. This allows for efficient capital treatment of hedged positions. Examples of such netting can be found here.

• No Cross-Asset Netting: To ensure risks are managed robustly, risk in one asset class cannot be offset by positions in another.

Risk-Free Numeraire: The only risk-free asset is USD. All Margin and Margin Requirements are calculated and expressed in USD.

Margin (Account Equity): Total equity value of an account.

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Where:

• Collateral: The USD value of your spot assets

• Unsettled PnL: Bullish uses Futures Style Margining (FSM) for all derivatives, including options. This means profits and losses are marked-to-market and settled in USDC every hour. The Unsettled PnL is the current mark-to-market value change since the last hourly settlement.

• Liabilities: The USD value of any assets you have borrowed.

Margin Requirement (MR): Minimum equity required to cover potential future losses.

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Where: Market Risk and Liquidity Risk are defined below.

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The market risk is the maximum loss (negative of the minimum PnL) found across all scenarios:

Key Model Parameters:

• Liquidation Horizon: Liquidation window ranging from 6 to 48 hours.

• Lookback Period: Calibrated using 1 year of historical data plus chosen stress event.

• Spot shifts and Vol Shifts: Please see here

Liquidity Risk models the additional cost (market impact) incurred when closing positions.

Liquidity Risk = min(Liquidation AddOn, Hedging AddOn)

where:

• Liquidation Add-On represents the market impact coming from closing some/part of the portfolio's instruments directly

• Hedging Add-On represents the anticipated market impact incurred from delta-hedging the portfolio until expiry (instead of closing its instruments)

Methodology by Product Type

• Spot and Perpetuals: The cost is calculated using the Bullish Portfolio Collateral (BPC) haircut system. 

• Dated Futures: Cost assumes hedging with a perpetual and later unwinding it, which doubles the impact.

• Options: A separate Liquidity Risk component is currently used. It is a function of size and option’s details. We will be revisiting this with a proper market impact function reflecting liquidating costs in-house once we have enough options data in our exchange.