Initial Margin vs Variation Margin
Also called: initial margin, variation margin, margin requirements
Initial margin is collateral posted upfront to cover potential future losses; variation margin is cash moved daily to settle losses that have already happened. The distinction decides who is exposed to whom: variation margin keeps exposure near zero day to day, while initial margin sizes the buffer for the gap between a default and a liquidation. Sharply rising variation margin calls are what turn a price shock into a liquidity crisis.
Where this is taught
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