What Is the Difference between Initial Margin and Variation Margin in a CCP? ⎊ Path

What Is the Difference between Initial Margin and Variation Margin in a CCP?

Initial margin is the collateral required to be posted by a clearing member before entering into a derivatives contract. It covers the potential loss in the event of a member's default.

Variation margin, or maintenance margin, is the daily payment made by a member to the CCP to cover any losses resulting from the mark-to-market changes in the contract's value, ensuring the member's account is always up-to-date with current losses.

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