What Is the Difference between Initial Margin and Variation Margin as Used by a CCP? ⎊ Path

What Is the Difference between Initial Margin and Variation Margin as Used by a CCP?

Initial margin (IM) is the collateral required upfront to open a derivatives position. It is intended to cover the potential loss on the position until it can be liquidated following a default.

Variation margin (VM) is the daily cash flow paid or received to reflect the mark-to-market change in the position's value. IM covers potential future losses, while VM settles current daily gains or losses.

How Does Variation Margin Differ from Initial Margin in Mitigating Counterparty Risk?

Differentiate between Initial Margin and Variation Margin

How Do Margin Requirements Help Prevent Systemic Risk in Derivatives Markets?

How Does the Daily Mark-to-Market Process Impact the Cash Flow of a Futures Trader?

What Are the Initial Margin and Variation Margin, and How Do They Protect the Clearing House?

How Does High Volatility in the Underlying Asset Affect Initial Margin Requirements?

How Does MTM Relate to the Concept of Realized and Unrealized Gains/losses?

Can Cryptocurrencies Be Used as Collateral for Margin in Traditional Futures Markets?

Glossar

Variation Margin

Collateral ⎊ Variation Margin represents a dynamic adjustment to posted collateral requirements in cryptocurrency derivatives markets, reflecting real-time mark-to-market losses on open positions.