Collateral margin is a term commonly used in financial transactions, particularly in lending and trading. It refers to the amount of collateral that a borrower or trader must provide in relation to the total value of the loan or trade.

When engaging in activities such as margin trading or taking out a loan, lenders or exchanges typically require collateral to mitigate the risk involved. Collateral can be in the form of cash, securities, or other assets that have a measurable value. The collateral margin is the percentage of the total value of the loan or trade that must be provided as collateral.

For example, if a lender requires a collateral margin of 20% on a $10,000 loan, the borrower must provide $2,000 worth of collateral. This ensures that the lender has a buffer in case the borrower fails to repay the loan or if there are significant losses in a margin trading position.

Collateral margin serves as a safeguard for lenders and helps to protect against potential defaults or losses. It provides a level of security and reduces the risk involved in financial transactions by requiring borrowers or traders to have a stake in the transaction.