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

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.

What Is “Pre-Funded Variation Margin” in the Context of Smart Derivatives?

Is Variation Margin Always Paid in Cash, or Can It Be Paid in Other Assets?

What Is the Difference between Physical Settlement and Cash Settlement after a Credit Event?

What Is the Difference between Initial Margin and Variation Margin for Futures?