MARGIN

In the futures markets, it is the amount of money to pay in order to keep the position on the market. The Clearing House is the counterpart of the operations and requires the settlement of margins on a daily basis. Margins have to be paid as deposits, and they can be:

- initial margin: it is a percentage of the nominal value of the contract to be bought. The percentage is settled by the Clearing House. The initial margin can be paid by means of cash, treasury bonds, and other payment methods issued by banks.
- delivery margin: it guarantees against the risk of price changes on the very last day of the contract. 
- variation margin: on a daily basis by means of the marking to the market, profits and losses are settled on the market. It should be paid in cash.
Bibliography
Hull J. (2008) Options, futures and other derivatives, Prentice Hall.
Oldani C. (2008) Governing Global Derivatives, Ashgate, London.
Editor: Chiara OLDANI
© 2010 ASSONEBB