PRESENT VALUATION OF EMISSION CREDIT AND ALLOWANCE FUTURES

• US 20070192221A1
• Filed: 02/06/2007
• Published: 08/16/2007
• Est. Priority Date: 02/10/2006
• Status: Abandoned Application

• Current Assignee: Chicago Climate Exchange, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Chicago Climate Exchange, Inc. (Intercontinental Exchange, Inc.)
• Inventors: Walsh, Michael, Sandor, Richard, Kanakasabai, Murali
• Application Number:
  US11/671,750
• Publication Number:
  US 20070192221A1
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: Y02P 90/90 Financial instruments for climate change mitigation, e.g. environmental taxes, subsidies or financing

Abstract

The present invention is directed to a computer-operated method for determining the present value of a futures contract for a commodity. The method includes selecting an expiration date for the futures contract, calculating a customized interest rate factor based on interest rates surveyed from a plurality of lending institutions, and applying the customized interest rate factor to the futures contract price to determine the present value.

Claims

1. A computer-operated method for determining the present value of a futures contract for a commodity, which comprises:

selecting an expiration date for the futures contract;

calculating a customized interest rate factor based on interest rates surveyed from a plurality of lending institutions; and

applying the customized interest rate factor to the futures contract price to determine the present value.

2. The method of claim 1, which further comprises calculating a composition futures price.

3. The method of claim 1, which further comprises calculating and adding a customized storage cost factor to the futures contract price.

4. The method of claim 1, wherein the expiration date is selected within a calendar month at least one year in the future.

5. The method of claim 4, wherein the future calendar month that is selected is one that correlates to a past month that experienced a higher amount of trading volume for the commodity than in another month of a prior trading session.

6. The method of claim 5, wherein the future calendar month that is selected is one that correlates to a past month that experienced the largest amount of traded volume relative to the other months of five prior trading sessions.

7. The method of claim 4, which further comprises changing the expiration date to a new date on the day the new date realizes higher traded volume than the expiration date for three consecutive business days.

8. The method of claim 1, wherein the customized interest rate factor is calculated by averaging future interest rates quoted from a plurality of lending institutions and multiplying the result by the ratio of days remaining until the first possible delivery date of the futures contract over 360.

9. The method of claim 8, wherein the interest rates are obtained from at least ten different lending institutions and the customized interest rate factor is calculated by excluding the two highest and two lowest interest rates and averaging the six remaining interest rates.

10. The method of claim 1, wherein the interest rates are based on the specific number of days until expiration of the futures contract.

11. The method of claim 1, wherein the expiration date comprises multiple expiration dates in the same or different future years.

12. The method of claim 11, wherein the multiple expiration dates correlate to present or past dates for which open interest constitutes more than 3% of total open interest in the futures contract.

13. The method of claim 11, which further comprises determining a single present value for the multiple expiration dates.

14. The method of claim 13, wherein the single present value is determined by:

calculating the proportion of open interest represented by each of the multiple expiration dates relative to the other expiration dates;

multiplying the proportions by their respective calculated present values to yield relative statistical weighting placed prices; and

combining the relative statistical weighting placed prices to yield the single present value.

15. The method of claim 1, wherein the commodity is carbon dioxide and the futures contract comprises carbon financial instruments.

16. A computer-operated method for facilitating futures contract trading, which comprises:

establishing a sales price for a futures contract for a commodity;

determining the present value of the futures contract according to claim 1;

and

selling the futures contract to a buyer who desires to acquire the futures contract at the present time for use in the future.

17. A computer-operated method for trading futures contracts for carbon financial instruments which includes the step of deriving a carbon market index from the method of claim 1 and applying the index to facilitate trading of the futures contracts.

18. The method of claim 17, wherein the index is calculated in Euro-denominated values but is expressed in a variety of other currencies.

19. The method of claim 1 which further comprises:

establishing an emission reduction schedule for certain participants based on emissions information provided by those participants; and

conducting trades of the futures contracts to enable the certain participants to meet the reduction schedule.

20. The method of claim 19, wherein the emission reduction schedule is for a period of years and the trades of the futures contracts enables the certain participants to meet the reduction schedule in future years.

21. A carbon market index that includes prices for futures contracts in present value that are determined by the method of claim 1.