Initial margin: Difference between revisions

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Also known, to ISDAphiles, as {{csaprov|Independent Amount}}, this is the amount of collateral or margin a counterparty requres up front, notwithstanding any change in the mark-to-market value of the transaction.
Also known, to ISDAphiles, as {{csaprov|Independent Amount}} and to aggressive predictive text engines as “''I’m''”, this is the amount of collateral or [[margin]] a [[counterparty]] requires up front, notwithstanding any change in the [[mark-to-market]] value of the transaction.


Compare, by way of contrast, [[variation margin]].
Compare, by way of contrast, [[variation margin]].

Revision as of 12:52, 22 June 2018

Also known, to ISDAphiles, as Independent Amount and to aggressive predictive text engines as “I’m”, this is the amount of collateral or margin a counterparty requires up front, notwithstanding any change in the mark-to-market value of the transaction.

Compare, by way of contrast, variation margin.

Initial margin and variation margin

Margin comes in two forms.

  • Variation margin, or VM, is collateral against the present mark-to-market value of the transaction exposure.
    • If you don’t have this and the counterparty goes bust, you’re whistling.
    • In many kinds of margin loan, VM will take the form of the asset in question itself.
  • Initial margin, or IM, is additional collateral in excess of the present mark-to-market value of the transaction exposure.
    • This guards against sudden adverse movements in the value of the collateral or the exposure between margin calls.
    • IM is calculated by reference to the expected maximum loss in value of the transaction (and the existing margin) over the margin period.

See also

Anatomy™: AIFMD | CASS | COBS | Conference calls | Confis | CRR | CSA | EMIR | Equity Derivatives | FOA PCA | FUND | GMRA | GMSLA | ISDA | OSLA | PB | Swapclear | UCITS