Derivative products

A non-transitory computer-readable medium containing computer-executable instructions for performing a method comprising:

• a) receiving an initial performance bond of a protection buyer of a derivative product, wherein the derivative product has a digital outcome and comprises a predetermined number of constituents;
• b) receiving an adjusted performance bond of a protection buyer of the derivative product;
• c) updating a price of the derivative product at an interval through a mark-to-market process;
• d) transferring a cash flow between the protection buyer and a protection seller based on the price of the derivative product;
• e) adjustinq the cash flow including a part of a total fee for the derivative product based on the price of the derivative product, such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different;
• f) for each of the predetermined number of constituents that experience a predetermined triggering event before an expiration date, requiring sufficient funds to cover a percentage of a final settlement price of the derivative product;
• and
• g) terminating the derivative product at the earlier of:
• the expiration date, or an occurrence of the predetermined triggering event for all constituents in the derivative product.

An apparatus for purchasing an exchange traded derivative product using a computer system, comprising:

• a processing unit;
• an interface comprising at least one of an input device, output device, and network interface;
• a memory unit storing computer-executable instructions configured to cause the processing unit to perform a method comprising:
• a) submitting, using the interface, an initial performance bond for the derivative product for receipt by a computer system that processes and clears an agreement for the derivative product, wherein the derivative product has a digital outcome and a price, and wherein the computer system updates the price of the derivative product at an interval through a mark-to-market process, including transferring a cash flow between a protection buyer of the derivative product and a protection seller of the derivative product based on the price of the derivative product,
• b) adjusting the cash flow including a part of a total fee for the derivative product based on the price of the derivative product such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different;
• c) if a predetermined triggering event occurs for any of the predetermined number of constituents before an expiration date, then requiring sufficient payment to cover an appropriate percentage of the final settlement price of the derivative product;
• and
• d) if no predetermined triggering event occurs before the expiration date, then terminating the agreement at a zero final settlement price.