Just stumbled upon this. http://www.cmegroup.com/wrappedpage...InterCommodityRates&h=2&reporttype=marginrate Anyone else use it? What exactly do those ratios mean? That I dont have to work out exact DV01 ratios for ted spreads and that I can just use these ratios for spread trading?
I believe it's based on average, relative volatility. The dollar movement on one side of the trade is approximately equal to the dollar movement on the other leg of the trade. Instead of using a 2-to-3 ratio you could use 3-5, 61-100, 31-50, 5-8, 63-100, 16-25, 13-20, 67-100, 17-25, 69-100, 7-10 et al for a more precise hedge based on your own market expectation and still get favorable margin treatment.
here ... http://www.wolframalpha.com/entities/calculators/minimum_variance_hedge_ratio_calculator/xj/ou/1s/ or do a regression and use the results