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A term whose meaning depends on the context. In the widest sense, it means the difference between two values. In financial accounting, it refers to the difference between the selling price of a product and its cost of production, the profit margin or operating margin. In financial markets, it refers to the cash or securities contributed by a purchaser in part payment for the securities held in a margin account. The remainder is normally loaned by the brokerage house through which the trade is made. Securities bought, in part, with money loaned by a broker are said to have been bought 'on margin'. When a trade is first made, the purchaser pays an initial margin. To ensure that margin requirements keep pace with any subsequent losses account holders may have to pay variation margin to bring the account up to initial margin requirements. This is calculated by revaluing all positions with reference to the previous day's closing price. It is sometimes referred to as maintenance margin.
See also: Gearing, Margin Call, Haircut,