# Initial Margin ⎊ Area ⎊ Resource 6

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## What is the Collateral of Initial Margin?

Initial margin is the minimum amount of collateral required by an exchange or clearinghouse to open a new leveraged position in derivatives trading. This deposit serves as a performance bond, ensuring that the trader can cover potential losses from adverse price movements. The initial margin requirement varies based on the specific derivative instrument and the perceived risk of the underlying asset.

## What is the Calculation of Initial Margin?

The calculation of initial margin is typically based on a percentage of the total position value, often determined by a risk model that considers historical volatility and market conditions. In cryptocurrency derivatives, high volatility often necessitates higher initial margin requirements compared to traditional markets to mitigate counterparty risk. Exchanges continuously monitor margin levels to ensure adequate collateralization.

## What is the Risk of Initial Margin?

The primary function of initial margin is to mitigate systemic risk by limiting excessive leverage and protecting the solvency of the trading platform. If a position moves against the trader, the initial margin absorbs the initial losses before a maintenance margin call or liquidation occurs. Proper management of initial margin is essential for preventing cascading defaults in highly volatile markets.


---

## [Adversarial Price Manipulation](https://term.greeks.live/term/adversarial-price-manipulation/)

## [Stochastic Solvency Modeling](https://term.greeks.live/term/stochastic-solvency-modeling/)

## [Systemic Solvency Architecture](https://term.greeks.live/term/systemic-solvency-architecture/)

## [Real-Time Collateral Validation](https://term.greeks.live/term/real-time-collateral-validation/)

---

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**Original URL:** https://term.greeks.live/area/initial-margin/resource/6/