Variation Margin ensures that profit and losses are up to date. Initial Margin is used to estimate potential losses following a default, in the period between the last margin collection and the close out of the position. This will be calculated based on:
- An assumed Holding Period
- Likely price movements under normal market conditions
- To an assumed Confidence Level
Initial Margin algorithms also cover some additional risks, such as Liquidity or Model risk. Initial Margin is calculated based on algorithms designed by the CCPs, for example SPAN.
We invite you to learn more and read more of our content. Explore our collection of Ebooks, such as our Margin Management Ebook . Explore a wide selection of blogs on our insights page, such as our blog on The Importance Of Forecasting Margin Requirements. Additionally, learn more about OpenGamma by watching our demo and taking a look at our product and solutions pages.
