Initial margin (IM)
Quantitative Finance glossary · Quantitative Finance
Definition
The collateral required at trade inception to cover potential close-out exposure over the margin period of risk (typically 10 days for centrally-cleared OTC).
Initial margin (IM) in plain English
When two people agree to a deal that could go badly over the next couple of weeks, it's smart to put down a security deposit upfront in case one side can't pay. Initial margin is exactly that deposit for financial trades: cash or safe assets posted the moment the trade starts, sized to cover how much the position could realistically move against you before the mess gets cleaned up (often assumed to take about 10 days). It's a just-in-case buffer collected before anything goes wrong, so if your trading partner vanishes, there's already money set aside to absorb the loss.
Also called: IM
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