Define ‘Bankruptcy Price’ in the Context of Futures Liquidation.
The bankruptcy price is the price at which a trader's margin balance is exactly zero. If a liquidated position is closed at or beyond this price, the trader's account incurs a negative balance, resulting in a loss for the exchange.
The liquidation process is designed to close the position before the market price reaches the bankruptcy price, but in volatile markets, slippage can cause the execution price to be worse.
