Variation margin (marking to market)

The ECB requires the value of the underlying assets to remain within a certain margin during the life of a liquidity-providing reverse transaction. If the market price of the underlying assets, which is recalculated on a regular basis, falls below the variation margin, counterparties must provide additional assets or cash. – On the other hand, if the market value of the underlying assets after their revaluation exceeds the amount owed by a counterparty plus the variation margin, the central bank returns the excess assets or cash to the counterparty. – See cash settlement, close-and-reprice contract, margin call, margin call, margin agreement. – See ECB Monthly Bulletin, May 2004, p. 81; ECB Monthly Bulletin, October 2007, p. 93 et seq. (comparing collateral arrangements at the ECB with the U.S. and Japan; many overviews).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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