How Does the Frequency of Variation Margin Calls Impact Risk Management?

A higher frequency of variation margin calls, such as intraday instead of just end-of-day, significantly enhances risk management. It reduces the amount of credit exposure a clearing house has to its members by ensuring that losses are covered more quickly.

In volatile markets, prices can move substantially during a single day, and intraday margin calls prevent these losses from accumulating. This reduces the risk that a member's initial margin will be insufficient to cover losses in the event of a default.