The payment of cash or other acceptable collateral to a derivatives exchange based on the risk of loss of the particular position. There are two types of margin payments: initial margin is the sum placed with the exchange as a “good faith” deposit when a trade is first entered into; and variation margin is the amount of money that changes hands between the exchange and the derivatives counterparty to settle the daily change in the market value of the contract.
« Back to Glossary IndexMargin
« Back to Glossary Index