Define the ‘Bankruptcy Price’ in the Context of a Futures Liquidation.
The bankruptcy price is the theoretical price at which a trader's margin balance equals zero. It is the price point where the loss on a position exactly equals the initial margin and any remaining maintenance margin.
If a position is liquidated and closed at a price worse than the bankruptcy price, it results in a deficit that the insurance fund must cover.
Glossar
Bankruptcy Price
Threshold ⎊ This theoretical price point represents the level at which a specific derivative position, often collateralized, becomes sufficiently under-margined to trigger immediate liquidation or default procedures under the governing contract terms.
Bankruptcy
Default ⎊ This state signifies a critical failure where a counterparty's obligations exceed their available collateral, often triggered in options or futures trading when losses cannot be covered.