Risk at the margin

Portfolio Margining

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Hedge funds are a vital source of revenue for dealers. Within the increasingly competitive world of prime brokerage, one powerful way for firms to attract hedge fund business is to reduce margin requirements for clients. But that's easier said than done. Relax margin requirements too much and the bank could be at risk if markets fall and hedge fund counterparties collapse.

Prime brokers have typically set margin on a trade-by-trade basis - and certainly in isolation of any other trades the

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