What is Value at Risk (VaR), Extreme Loss Margin (ELM), and Adhoc margins?

What is Value at Risk (VaR), Extreme Loss Margin (ELM), and Adhoc margins?

Value at Risk (VaR): This statistical measure calculates the potential loss an investment portfolio or trading position may face over a specific period. They cover a single day in liquid stock and three days in illiquid stocks.

Extreme Loss Margin (ELM): Extreme Loss Margin is an additional margin imposed by exchanges to cover potential losses that may exceed the estimate provided by VaR. It acts as a safety net for unforeseen conditions. A small percentage of the position value is applied to buying and selling positions.

Adhoc Margins: Adhoc margins are additional margins imposed by exchanges or brokerage firms on specific securities or trading positions in response to sudden market developments. Exceptional margins are blocked on particular securities depending on the nature of the market participants.  


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