NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A broker's client buys 1,000 shares at ₹200 in the cash segment. The applicable VaR margin is 12% and the extreme loss margin (ELM) is 3%. Ignoring other margins, what total upfront margin must be collected on this purchase?
The total margin is ₹30,000. The trade value is ₹2,00,000, and VaR margin of 12% plus extreme loss margin of 3% gives 15%, which equals ₹30,000. Leaving out ELM would understate the requirement at ₹24,000.
- A₹30,000Correct
- B₹24,000
- C₹6,000
- D₹36,000
Explanation
Trade value = 1,000 × 200 = ₹2,00,000. Combined margin = 12% + 3% = 15%, so 15% × 2,00,000 = ₹30,000. ₹24,000 omits ELM, ₹6,000 uses only ELM, and ₹36,000 wrongly adds 3% twice or uses 18%.
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