I am trying to model margin requirements on various commodity futures, however it doesn't seem that the CME has released the formula they use to set these performance bonds. I am sure that they use some measure of volatility to determine a value that prevents daily changes greater than the requirement. Does anyone have any experience in this endeavor, or can point me to some resources?
Keyword SPAN and the summarized answer is that it sets margin requirements as a function of risk/volatility. CME and other exchanges also function as clearers and thus they have an interest that market participants who clear with CME remain solvent. The exchange runs stress tests and determines a reasonable amount of performance bond that has to be deposited as margin in order to minimize the risk of insolvency under current stress tested market environments and certain constraints, among others a margin level reasonable enough to optimize turnover in their offered products.