CoachA performance bond is the futures industry’s name for initial margin: collateral deposited to guarantee performance, not a down payment. For a client account the broker sets an initial level, required to open a position, and a lower maintenance margin: when the account’s equity falls below the maintenance requirement the client is called to restore it to the initial level. For clearing members the two coincide.
Examples
Example 20.4 (The risk array of one future)
A regulator’s review of the system prints the array of the large S&P 500 future on 12 April 2001, when its maintenance margin was $17 250: zero in the two volatility scenarios; losses of , and at one, two and three thirds; and in the extreme scenarios, a move of three times the range with 30% of the loss counted, . A long future’s scan risk is the full move down, $17 250; the extreme scenario, at $15 525, does not bind. It binds for the option seller.