Cash or collateral passed each day to reflect the change in a contract's value. It settles gains and losses as they occur.
Where you will meet it
Variation margin comes up in 31 learning outcome notes across the FRM syllabus.
A few of them:
Introduction to Derivatives FRM Part I · Financial markets and products
“The clearing house controls credit risk with initial margin and daily marking to market, so losers pay variation margin each day.”
Derivatives FRM Part II · Credit risk measurement and management
“They trade on a regulated venue with transparent prices and are cleared by a clearing house that requires initial and daily variation margin.”
Liquidity Risk FRM Part II · Liquidity and treasury risk measurement and management
“Falling prices created large variation margin calls.”
Introduction to Derivatives FRM Part I · Financial markets and products
“A futures position has a payoff that is linear in the price move, requires only margin, and can lose more than the margin posted because variation margin must be paid.”
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