NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A broker's client has a cash-segment exposure where the VaR margin is 12% and the Extreme Loss Margin (ELM) is 3.5% on a net buy position worth Rs 4,00,000. What is the total margin (VaR plus ELM) to be collected?
The total margin is Rs 62,000, because VaR margin of 12% and ELM of 3.5% add up to 15.5%, and 15.5% of Rs 4,00,000 equals Rs 62,000. Using only VaR or only ELM would understate the requirement.
- ARs 14,000
- BRs 48,000
- CRs 62,000Correct
- DRs 66,000
Explanation
Total margin rate = 12% + 3.5% = 15.5%. 15.5% of Rs 4,00,000 = Rs 62,000. Rs 48,000 uses VaR alone, and Rs 14,000 uses ELM alone. Rs 66,000 is a wrong rate.
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