Often referred to as VM. Collateral posted under a derivatives transaction to cover a party's exposure to its counterparty under the transaction due to:

Typically, the party acting as valuation agent under to the applicable ISDA® credit support annex (CSA) calculates mark-to-market movements in the parties' trading positions as well as the value of posted margin collateral on a daily (or often intra-day) basis to determine if there is any net uncollateralized exposure. This determines whether or not VM collateral must be transferred between the parties to cover this exposure.

If, for example, one party's position has improved in the aggregate, it may be entitled to the return of some or all of the variation margin collateral that it has posted with its counterparty and, depending on the magnitude of the movement, it may be entitled to receive collateral from its counterparty.

If the parties have entered into multiple transactions under a particular ISDA Master Agreement (ISDA Master) to which the CSA relates, the parties' positions under all of the transactions are netted to arrive at an aggregate position and aggregate VM exposure.