// definition
Variation margin
Margin for current mark-to-market exposure
Short definition
A transfer linked to a position’s change in value that settles or collateralises current exposure according to the contract. Cleared derivatives generally require cash. Receipt can lag a payment due on another position.
risk atlas
Knowledge map
Intuition
Variation margin tracks gains and losses since the previous valuation. Payment can precede cash received on another position.
Formula
for a linear contract: variation margin ≈ price change × contract size × number of contractsWhy it matters now
On a short oil hedge, a higher barrel can cause an immediate outflow before the physical cargo is paid for.
Related analyses
- Government debt: the margin-call deadline
- When the barrel becomes a margin callHedging, cash, clearing and transmission to bank balance sheets.
Related guides
- Reading the oil marketPrices, curve, inventories, OPEC and physical data.
- Reading interest-rate swapsValuation, clearing and counterparty risk in derivatives.
Related datasets
- risk.jsonPublic snapshot of the risk signals.
- signals/history.jsonPoint-in-time history of the signals.
- risk-diff.json1, 7 and 30-day diff of signals, sources and models.
- evidence-graph.jsonClaims, evidence and their sources as a graph.
Signals using it
- Energy MonitorMethodology of the energy stress signal.
- Risk DiffRecent change in risk and source freshness.
Primary sources
- Intercontinental ExchangeBrent future specifications, clearing and indicative margins.
- European Central BankEnergy derivatives, margin calls, bank credit and EMIR data.
- Bank of EnglandMeasures of the 2022 European energy-margin stress.
- Financial Stability BoardInternational recommendations on margin-call preparedness.