Investment and method for hedging operational risk associated with business events of another

• US 20050251478A1
• Filed: 09/23/2004
• Published: 11/10/2005
• Est. Priority Date: 05/04/2004
• Status: Abandoned Application

• Current Assignee: JP Morgan Chase Bank, N.A. (JP Morgan Chase & Co)
• Original Assignee: JP Morgan Chase Bank, N.A. (JP Morgan Chase & Co)
• Inventors: Yanavi, Aura
• Application Number:
  US10/947,931
• Publication Number:
  US 20050251478A1
• Time in Patent Office: Days
• US Class Current: 705/40
• CPC Class Codes: G06Q 20/102 Bill distribution or payments
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

An investment and a method for hedging operational risk associated with another'"'"'s business events is disclosed. In particular, the method includes a seller receiving consideration from a buyer and, in return for the consideration, making a payment to the buyer upon the occurrence of a predetermined event. The event payment is for a predetermined amount and may be related to an expected economic loss to the buyer if the predetermined event occurs. The predetermined event is related to a complete or partial success or failure of a reference entity'"'"'s product, service, or product and service, and may or may not cause an economic loss to the buyer.

Claims

1. A method for investing comprising:

promising to pay an amount to a buyer upon occurrence of a predetermined event as part of an agreement, wherein the agreement defines the event as related to a complete or partial success or failure of a reference entity'"'"'s product, service or product and service, and

receiving an obligation to provide value in return for said promise.

2. The method according to claim 1 wherein the agreement is a swap agreement having a financial value.

3. The method according to claim 2 further comprising transferring the agreement to a party wherein the party is obligated to pay the amount upon occurrence of the predetermined event to the buyer.

4. The method according to claim 3 wherein the party is entitled to receive the value from the buyer in exchange for the party'"'"'s obligation to pay the amount.

5. The method according to claim 2 further comprising receiving a sum related to the financial value of the agreement in exchange for transferring the agreement to a party.

6. The method according to claim 2 further comprising promising to pay the amount to a party upon occurrence of the predetermined event wherein the party has purchased the agreement from the buyer.

7. The method according to claim 6 wherein the party is obligated to provide the value in exchange for said promise of the amount.

8. The method according to claim 1 wherein the buyer has a contractual relationship with the reference entity involving the reference entity'"'"'s product, service, or product and service.

9. The method according to claim 8 wherein the predetermined event causes an economic loss to the buyer.

10. The method according to claim 9 wherein the amount is related to the economic loss to the buyer if the predetermined event occurs.

11. The method according to claim 1 wherein the value received is a periodic fee related to the amount.

12. The method according to claim 1 wherein the occurrence of the predetermined event is controlled by a third party that issues quality ratings or certifications.

13. The method according to claim 1 wherein information pertaining to the agreement is stored in a computer-readable memory.

14. A method for hedging against risk comprising:

identifying a risk associated with a complete or partial failure of a reference entity'"'"'s product, service, or product and service, wherein the risk is an operational risk resulting from a business relationship with the reference entity, wherein the relationship involves the reference entity'"'"'s product, service, or product and service;

identifying a predetermined event related to the complete or partial failure of the reference entity'"'"'s product, service, or product and service, wherein the predetermined event causes an economic loss;

receiving a promise to pay an amount from a seller upon occurrence of the predetermined event, wherein the amount is related to the economic loss expected upon occurrence of the predetermined event, and

providing value to the seller in return for the received promise.

15. The method according to claim 14 wherein the providing value and the receiving the promise is provided in an agreement, wherein the agreement is a swap agreement having a financial value.

16. The method according to claim 15 further comprising providing value to a party wherein the party purchased the agreement from the seller.

17. The method according to claim 16 wherein the party is obligated to fulfill the promise of paying the amount upon occurrence of the predetermined event.

18. A method of investing related to a risk associated with a complete or partial success or failure of a reference entity'"'"'s product, service, or product and service, the method comprising the step of entering into an agreement having at least two sides wherein:

consideration on one side of the agreement comprises a promise to pay an amount, wherein the payment is contingent upon the occurrence of a predetermined event related to the complete or partial success or failure of the reference entity'"'"'s product, service or product and service, and

consideration on the other side of the agreement comprises an obligation to provide value for said promise.