Foreword: The full name of SPAN is the Standardized Portfolio Analysis of Risk (SPAN for short), which can accurately calculate the overall market risk of any investment portfolio, and on this basis, it can be calculated based on the exchange's risk management concept. Security deposit receivable.
SPAN Historical Background
After the U.S. financial market reflected on the stock market crash of 1987, the Chicago Mercantile Exchange (CME) launched a new policy in December 1988 based on the recommendations of the Presidential Advisory Group to strengthen risk control. On the 16th, SPAN was designed and launched. After 16 years of testing and improvement, the SPAN system has been widely recognized by the market and adopted by nearly 50 exchanges, clearing houses and other financial institutions. It has become an international standard for calculating investment portfolio margin and risk assessment. Its core The advantage is efficient financial risk management capabilities.
The emergence and rapid promotion of the SPAN system is related to the rapid development of the world's futures market (especially options) since the 1980s. The derivatives market not only includes futures with linear risks, but also options with non-linear risks, and the risks of each position are closely related. Institutions participating in derivatives market investments not only need to evaluate the profits and losses of positions held at any time, but also understand Portfolio risk characteristics and potential risks during the holding period. Therefore, it is very urgent to establish a risk control system that comprehensively measures market risks. Having a total risk value can not only help investors, banks and securities firms control their own position risks, but also enable regulatory agencies such as the central bank and the China Securities Regulatory Commission to effectively control the risks of financial institutions. Regulatory authorities require all market entities to maintain appropriate funds to cope with possible market risks, thereby stabilizing the financial market and increasing investor confidence.
SPAN basic idea
Value at Risk (VaR) is a commonly used risk measure. It is an asset portfolio within a specific holding period and under a specific confidence level. , the maximum possible loss of an investment portfolio due to changes in market prices. Since the asset portfolio of financial institutions or investors may also include options or other derivatives in addition to stocks, based on considerations of accuracy and efficiency, the scenario simulation method has gradually become the best choice for measuring risk value.
SPAN is one of the tools developed based on the scenario simulation method to measure the position risk of clearing members. SPAN applications include stocks, bonds, OTC derivatives, spot contracts, futures contracts and options. The core of SPAN is the calculation of option margin.
SPAN analysis method
SPAN analyzes all financial products in the same way. When calculating the margin, different commodities in the investment portfolio will first be classified, and commodities with the same or similar subject matter will be regarded as a commodity combination (CombinedCommodity). For example, options and futures can be combined and analyzed. In addition, SPAN further categorizes product combinations into different product groups (CombinedCommodityGroup) for calculation convenience.
SPAN uses the margin scale set by the exchange or clearing house and analyzes the investment portfolio in the following two steps: 1. SPAN first splits the commodities in the investment portfolio into different commodity combinations (CombinedCommodity ), calculate the risk value for each commodity combination; 2. After calculating the risk value of each commodity combination, analyze whether there are risks between each commodity combination that can offset each other.