Subject: Re: Holdings page?
From: Peter C. McCluskey (pcm@rahul.net)
Date: Fri Mar 10 2000 - 09:37:35 PST
erikd@cometsystems.com (Erik Diehn) writes:
>Can you explain the holdings page? Specifically, can you explain:
>
>-- what the heck "restricted cash" is, and
>
>-- how you generate the value at risk.
The first "value at risk" number is the amount you would lose if all claims
in which you hold contracts were settled for either the minimum or maximum
legal value, whichever is worse for you.
The second number is the same thing, but assuming settlement at a minimum
or maximum probable value.
When you're initially figuring out the holdings page, I recommend toggling
between the Longs/Shorts viewpoint and the Yes/No contracts viewpoint once
you have a short position ("No" contract).
The restricted cash is the difference between the way short positions
are evaluated under the first viewpoint and the way the equivalent No contracts
are evaluated under the second viewpoint.
I'm not fully satisfied with either of these viewpoints (or with this
explanation of them), and would welcome suggestions about how to improve
on this. I think the Yes/No contract viewpoint is likely to seem unnatural
to people who are familiar with the way short positions work in real-world
stock and futures markets, and at least the way FX handles it, sometimes
requires too much mental computation to swap between X and 100%-X.
OTOH, the initial effort to understand short positions seems fairly high
for many people, and when dealing with conditional claims I often need to
switch back to the Yes/No viewpoint to understand what's happening.
-- ------------------------------------------------------------------------ Peter McCluskey | Boycott Amazon.com until they stop suing http://www.rahul.net/pcm | companies that support 1-click shopping.
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