What is Initial margin in FRM Part 2?

Collateral posted to cover potential future exposure during the time needed to close or replace a defaulted portfolio. Initial margin is calibrated to adverse moves over a margin period of risk. It complements variation margin, which settles current mark-to-market exposure.

Initial margin

FRM Part 2 glossary · Credit Risk

Definition

Collateral posted to cover potential future exposure during the time needed to close or replace a defaulted portfolio.

Initial margin in plain English

Initial margin is calibrated to adverse moves over a margin period of risk. It complements variation margin, which settles current mark-to-market exposure.

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Related FRM Part 2 terms

Country risk premium (CRP)
Cover 2
Credit conversion factor (CCF)
Credit and Debit Valuation Adjustments (CVA/DVA)
Default waterfall
Distance to default (DD)
Economic capital
Excess spread
Expected Loss (EL)
Expected Positive Exposure (EPE)

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