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 binary outcome;
• 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) adjusting the cash flow including a part of a total fixed 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) if a predetermined triggering event occurs before an expiration date, then requiring sufficient funds to cover a final settlement price of the agreement and terminating the agreement;
• and
• g) terminating the agreement upon the expiration date before a predetermined triggering event occurs.

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 binary 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 fixed 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 before an expiration date, then requiring sufficient payment to cover 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.