Method, system, and computer program for an electronically traded synthetic exchange traded coupon

• US 20070288351A1
• Filed: 05/22/2007
• Published: 12/13/2007
• Est. Priority Date: 05/22/2006
• Status: Abandoned Application

• Current Assignee: Russell Huntley
• Original Assignee: Russell Huntley
• Inventors: Huntley, Russell
• Application Number:
  US11/805,319
• Publication Number:
  US 20070288351A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

In accordance with the principles of the present invention, a novel method, system, process, and computer program is provided that synthetically replicates a plain vanilla IR Swap through a future as well as to create a more fungible interest rate swap in the spot market. The forward start interest rate swaps of the present invention consist of a consecutive series of futures that value a forward start interest rate swap to start on a settlement date. The futures replicate the floating-rate payment terms for the interest rate swap that is being synthetically replicated. The spot interest rate swap is a standardized interest rate swap that is fungible.

Claims

1. A method for making vanilla interest rate swap more fungible by creating a synthetic interest rate swap comprising:

selecting a consecutive series of futures that value a forward start interest rate swap to start on a settlement date; and

selecting a term of the futures that replicates the floating-rate payment terms for the interest rate swap that is being synthetically replicated.

2. The method of making a vanilla interest rate swap more fungible of claim 1 further including exchange and electronic trading.

3. The method of making a vanilla interest rate swap more fungible of claim 1 further including clearing through a centralized clearing agent.

4. The method of making a vanilla interest rate swap more fungible of claim 1 further including the consecutive series of futures that value a forward start interest rate swap starting on an upcoming International Monetary Market (IMM) settlement date.

5. The method of making a vanilla interest rate swap more fungible of claim 1 further including tracking an interest rate swap that conforms to the terms prescribed by the ISDA in each market.

6. The method of making a vanilla interest rate swap more fungible of claim 1 further comprising establishing a secondary market for interest rate swaps.

7. The method of making a vanilla interest rate swap more fungible of claim 1 further comprising a clearing agent automatically netting trades on a daily basis.

8. The method of making a vanilla interest rate swap more fungible of claim 1 further comprising marking-to-market the synthetically replicated vanilla interest rate swap daily.

9. The method of making a vanilla interest rate swap more fungible of claim 1 further comprising defining the synthetically replicated vanilla interest rate swap by maturity date, effective date, and coupon.

10. The method making a vanilla interest rate swap more fungible of claim 1 further comprising the number of futures that make up the synthetically replicated vanilla interest rate swap being the tenor of the synthetically replicated vanilla interest rate swap divided by the tenor of floating rate date resets.

11. The method making a vanilla interest rate swap more fungible of claim 10 further comprising cash settling to a distinguished swap rate.

12. The method making a vanilla interest rate swap more fungible of claim 10 further comprising cash settling to the ISDA Benchmark Swap Rate.

13. The method making a vanilla interest rate swap more fungible of claim 1 further comprising valuing the synthetically replicated vanilla interest rate swap in accordance with:

VDS=(N−

(PDS+VIRS))*K

Where;

VDS=value of synthetically replicated vanilla interest rate swap from receiver'"'"'s perspective;

N=notional value;

PDS=par for FFF;

VIRS=value of the underlying IR Swap from receiver'"'"'s perspective, and

K=a notional constant.

14. The method making a vanilla interest rate swap more fungible of claim 1 further comprising trading an option off of the synthetically replicated vanilla interest rate swap.

15. The method making a vanilla interest rate swap more fungible of claim 14 further comprising trading a pay-fixed synthetically replicated vanilla interest rate swap option.

16. The method making a vanilla interest rate swap more fungible of claim 14 further comprising trading a receive-fixed synthetically replicated vanilla interest rate swap option.

22. The method of making a spot vanilla interest rate swap more fungible of claim 1 further comprising a clearing agent automatically netting trades on a daily basis.

17. A method for making a spot vanilla interest rate swap more fungible comprising creating a synthetic interest rate swap and selecting spot interest rate swaps that value an existing interest rate swap.

18. The method of making a spot vanilla interest rate swap more fungible of claim 17 further including exchange and electronic trading.

19. The method of making a spot vanilla interest rate swap more fungible of claim 17 further including clearing through a centralized clearing agent.

20. The method of making a spot vanilla interest rate swap more fungible of claim 17 further including tracking an interest rate swap that conforms to the terms prescribed by the ISDA in each market.

21. The method of making a spot vanilla interest rate swap more fungible of claim 17 further comprising establishing a secondary market for interest rate swaps.

23. The method of making a spot vanilla interest rate swap more fungible of claim 17 further comprising marking-to-market the synthetically replicated vanilla interest rate swap daily.

24. The method of making a spot vanilla interest rate swap more fungible of claim 17 further comprising defining the synthetically replicated vanilla interest rate swap by maturity date and coupon.

25. The method making a spot vanilla interest rate swap more fungible of claim 24 further comprising cash settling to a distinguished swap rate.

26. The method making a spot vanilla interest rate swap more fungible of claim 24 further comprising cash settling to the ISDA Benchmark Swap Rate.

27. The method making a spot vanilla interest rate swap more fungible of claim 17 further comprising valuing the synthetically replicated vanilla interest rate swap in accordance with:

VDS=(N−

(PDS+VIRS))*K

Where;

VDS=value of synthetically replicated vanilla interest rate swap from receiver'"'"'s perspective;

N=notional value;

PDS=par for FFF;

VIRS=value of the underlying IR Swap from receiver'"'"'s perspective, and

K=a notional constant.

28. The method making a spot vanilla interest rate swap more fungible of claim 17 further comprising trading an option off of the synthetically replicated vanilla interest rate swap.

29. An array curve matrix of synthetic interest rate swaps comprising a plurality of synthetically replicated vanilla interest rate swaps having tenors that range from relatively short-term to relatively long-term in a periodic increment.

30. An array curve matrix of synthetic interest rate swaps of claim 29 further wherein the future synthetic interest rate swap comprises a consecutive series of futures that value a forward start interest rate swap to start on a settlement date and the spot synthetic interest rate swap values an existing interest rate swap.

31. The array curve matrix of synthetic interest rate swaps of claim 29 further wherein at settlement, synthetically replicated vanilla interest rate swaps pricing the relatively short-term forward start interest rate swaps will expire and new synthetically replicated vanilla interest rate swaps pricing the relatively long-term forward start interest rate swaps will be issued.

32. The array curve matrix of synthetic interest rate swaps of claim 29 further including tenors that range from 3 months out to 30 years out in 3-month increments.

33. The array curve matrix of synthetic interest rate swaps of claim 32 further wherein at each settlement, synthetic futures interest rate swap pricing the 3-month forward start interest rate swaps will expire and new synthetically futures interest rate swaps pricing the 30-year forward start interest rate swaps will be issued.

34. The array curve matrix of synthetic interest rate swaps of claim 29 further wherein the plurality of synthetically replicated vanilla interest rate swaps comprise a plurality of synthetically replicated spot vanilla interest rate swaps.

35. The array curve matrix of synthetic interest rate swaps of claim 29 further wherein the plurality of synthetically replicated vanilla interest rate swaps comprise a plurality of synthetically replicated vanilla interest rate swap futures.

36. An application program interface comprising a plurality of synthetic vanilla interest rate swaps.

37. The application program interface of claim 36 further comprising a plurality of synthetic vanilla interest rate swaps options.

38. The application program interface of claim 36 further wherein the application program interface comprises a web-based platform.

39. The application program interface of claim 36 further wherein the application program interface comprises a graphical display of data related to the synthetic vanilla interest rate swaps.

40. The application program interface of claim 39 further comprising graphically displaying swap curve coupon rates and time to maturity.

41. The application program interface of claim 39 further comprising graphically displaying synthetic vanilla interest rate swaps.

42. The application program interface of claim 36 further wherein the application program interface comprises a graphical display of data related to the synthetic vanilla interest rate swaps.

43. The application program interface of claim 36 further comprising a plurality of synthetic spot vanilla interest rate swaps.

44. The application program interface of claim 36 further comprising a plurality of synthetic vanilla interest rate swap futures.