How Does a Clearinghouse Use “Variation Margin”?

Variation margin is the daily payment made by or to a clearing member to reflect the change in the market value (profit or loss) of their outstanding positions. It is paid in cash and is a key risk management tool, as it ensures that the exposure between the clearing house and its members is settled daily, preventing the accumulation of large, uncollateralized losses.

What Is the Role of Variation Margin in the Daily Settlement Process?
Explain the Concept of Mark-to-Market in Derivatives Clearing
What Is the Primary Difference between Futures and Forward Contracts regarding Settlement?
How Does MTM Reduce the Risk of Default for the Clearinghouse?
What Is the Difference between a Forward Contract and a Futures Contract regarding Settlement?
What Is the Significance of the “Variation Margin” in Daily Collateral Management?
How Does the Daily Mark-to-Market Process Impact the Cash Flow of a Futures Trader?
How Does Variation Margin Settlement Affect a Trader’s Cash Balance Daily?

Glossar