Variation margin

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Variation margin

An additional required deposit to bring an investor's equity account up to the margin level when the balance falls below the maintenance margin requirement.

Variation Margin

Extra money that a member of a clearing house must pay to the clearing house to meet its minimum maintenance requirements. Members pay the variation margin each day or more often to protect the clearing house from the risks inherent to its members buying on margin.
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NCC mitigates credit risks with prudent collateral management in respect to both initial and variation margins. This is typically done using statistical value-at-risk (VAR)-like methods, but to protect itself from tail risk arising from market turbulence (as in December 2014), NCC can manually increase collateral requirements.
Several deal with derivatives, where the exposure can now be lowered by deducting cash variation margins, excluding exposures that would be double-counted in some central clearing processes and capping written credit derivatives exposures at the level of the maximum potential loss.
The DCCC guarantees settlement for all trades executed on the Dubai Gold & Commodities Exchange (DGCX), which is supported by a system of initial and variation margins. Scheduled for full operation in early 2014, this exclusive agreement with Euroclear will enable clients of DCCC and DGCX to use CCP-eligible securities held in Euroclear Bank -- and in all other entities connected to the Collateral Highway -- as collateral to fulfill initial and variation margin requirements at DCCC.
The CCP will be powered by Calypso for novation, affirmation, registration, limits, initial and variation margins, collateral management, default management and trade repository.
Using daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members.
For OTC derivatives not clear by a Central Counterparty (CCP), the draft RTS prescribe that counterparties have to exchange both initial and variation margins. This will reduce counterparty credit risk, mitigate any potential systemic risk and ensure alignment with international standards.
Scheduled for full operation in early 2014, this exclusive agreement with Euroclear will enable clients of DCCC and DGCX to use CCP-eligible securities held in Euroclear Bank - and in all other entities connected to the Collateral Highway - as collateral to fulfil initial and variation margin requirements at DCCC.
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