View source for Cross-margining

{{ap|pb|}}The  process, common in prime brokerage, of calculating required initial margin by reference to net [[exposure]] across ''all'' products, rather than in silos where outstanding transactions under each [[master agreement]] are margined separately.

Cross-margining is often seen under a [[prime brokerage agreement]], which acts as a [[security]] deed over all clients assets that the [[prime broker]] holds in custody, and also often functions as a [[master netting agreement]] sitting across and cross-netting exposures under distinct [[master agreement]]s that may exist between the parties alongside the PBA (for example, an {{isda}} or a [[futures]] clearing agreement).

===Example===
Say a [[prime brokerage]] client has long custody assets of $100m and cash balance of $100m against a margin loan balance of $60m — therefore $140m in equity in its physical prime brokerage account. The broker applies a 30% financing [[haircut]] to the $100m of custody assets, meaning they have a credit value of $70m.

Meanwhile, under its {{isdama}}, it has a notional portfolio of $100m that is out of the money by $20m, generating an $30m initial margin requirement and a [[variation margin]] requirement of $20m.

Ordinarily, the customer would have to post $50m in margin under the swap. However, since the client has $100m in equity, the prime broker debits 50m from its cash account, leaving the client with a net equity of $50m across both accounts.

{| class="wikitable"
|+ Caption text
|-
! Item !! Positive Value !!  Negative Value !! Haircut || Financing Value
|-
| Long Assets || 100,000,000 || - ||30% || 70,000,000
|-
| Cash || 100,000,000 || - ||100% ||100,000,000
|-
| Loan || - || {{red|(60,000,000)}} || - ||  {{red|(60,000,000)}}
|-
| Swap IM || - || {{red|(30,000,000)}} || - || {{red|(30,000,000)}}
|-
| Swap VM || - || {{red|(20,000,000)}} || 100% || {{red|(20,000,000)}}
|- 
|'''Total''' || '''200,000,000''' || {{red|(110,000,000)}} || - || '''60,000,000'''
|}
 
{{sa}}
*[[Archegos]]