But as the previous variation example illustrates, it’s not overly complicated. Calculating variation margin depends on the type of security being traded and its price movements. So it’s something that must be done on a transaction-by-transaction basis, since every security is different. The Financial Industry Regulatory Authority (FINRA) requires the maintenance margin to be set […]

In this comprehensive guide, I’ll break down what variation margin is, its significance in risk management, how to calculate it, and its relationship with initial margin. To do this, firms were now required to exchange both variation margin and initial margin to mitigate counterparty credit risk. Both initial margin and variation margin ensure both parties