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Will the magnetic transition happen during MD simulation using VASP? Such as the transition from ferromagntic state to paramagnetic state. Since the ab initio molecular dynamics allows the optimization of electrons, will the magnetic moment of the electrons be optimized at the same time? Thanks in advance for your reply!

Yes. Magnetic moment can vary during the MD. However, do not expect that finite temperature MD will lead to the same optimized electron configuration like 0K relaxation.