// definition
Initial margin
Potential-loss collateral
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Short definition
Cash or liquid securities posted at inception and during a position to cover a potential loss while a defaulting participant is closed out. Its amount depends on risk, volatility and recognised portfolio offsets.
risk atlas
Knowledge map
Intuition
Initial margin is a buffer against a possible future loss during default liquidation, not settlement of today's loss.
Formula
initial margin = potential loss over the liquidation period, after recognised offsetsWhy it matters now
Volatility can raise this buffer just as participants are already funding daily losses.
Related analyses
- 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.