The margin period of risk is agreed, not calculated

The margin period of risk is not calculated. It is agreed.

Last month I wrote about a twenty year old constraint that shaped every margin model in this industry. It is doing the same quiet work somewhere I did not cover: how long a model assumes a close out takes.

Ten days is the general floor, for most centrally cleared portfolios. Five is a narrower carve out, for centrally cleared client transactions only. Twenty once collateral or the netting set gets difficult. Nobody derives it fresh per portfolio. It is fixed in advance, so every counterparty relies on the same reviewed assumption.

Same trade off as SIMM: precision against reconcilability, showing up again. A number that recalculated daily might be more accurate. It would also be unreproducible, which defeats a margin requirement that a counterparty, a clearing house, and a supervisor all have to trust at once.

Real time liquidation, the kind crypto venues run, skips this agreement entirely. Not automatically worse. A genuinely different answer to what a margin model is even for.

This first appeared on LinkedIn on 31 July 2026. If you want to comment or discuss, that's the place.