Two venues. One view of risk.
A long position gains when a price rises. A short position gains when it falls. Looking at them together can reveal an offset—but recognizing that offset requires assumptions about how well the hedge works.
Try the numbers ↓Count each venue separately.
The demo sets aside 20% of each position’s size as collateral. A $1,000,000 long and an $800,000 short therefore require $360,000 when treated independently.
Choose how much offset to trust.
Only the matched $800,000 can offset. At 50% recognition, the model credits half the potential reduction. At 0%, there is no benefit; at 100%, only the unmatched exposure drives this toy requirement.
Allocate separate collateral lots.
The resulting requirement is split between venues in proportion to their position sizes. Lot A and lot B are separate amounts; their sum equals the requirement. The diagram never counts one lot twice.
Required = 20% × (long + short − 2 × matched amount × hedge recognition)
A worked example
For a $1,000,000 long, $800,000 short and 50% recognition: $360,000 standalone − $160,000 offset = $200,000 collateral. That releases $160,000 in this hypothetical rule.