What is elm in finance?

Written by Editorial Team | Last Updated: August 2026

In the Indian financial and derivatives markets, ELM stands for "Extreme Loss Margin." It is a specific type of margin requirement imposed by exchanges that acts as an additional layer of financial safety. ELM is designed to cover potential losses from extreme or anomalous price movements that are not sufficiently captured by standard risk assessment models, such as the Value-at-Risk (VAR) or SPAN systems. It is applied over and above the existing margin requirements for both cash equity and derivatives, ensuring that traders and investors maintain enough collateral to withstand sudden market volatility, thereby protecting the overall integrity of the exchange and clearing house against catastrophic systemic defaults.

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