Computer-aided transferring of financial consequences

• US 20080065425A1
• Filed: 02/21/2007
• Published: 03/13/2008
• Est. Priority Date: 02/21/2006
• Status: Abandoned Application

• Current Assignee: Donald Van Dyke, Richard Nichol, Sandra Giuffre, Sanjay Sathe
• Original Assignee: Donald Van Dyke, Richard Nichol, Sandra Giuffre, Sanjay Sathe
• Inventors: Van Dyke, Donald, Giuffre, Sandra, Nichol, Richard, Sathe, Sanjay
• Application Number:
  US11/709,944
• Publication Number:
  US 20080065425A1
• Time in Patent Office: Days
• US Class Current: 705/4
• CPC Class Codes: G06Q 10/0635 Risk analysis of enterprise or organisation activities
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

Apparatus (method implemented with a machine, the machine, and the method for making the machine, and products produced thereby, as well as necessary intermediates and storage media). The computer system can, for example, be structured (e.g., including programmed) to carry out at least one of the steps of enabling an exchange of payments between parties related to uncertainty of risk. In another view, computer system can, for example, be structured to aid in at least one of the steps of: entering risk event data, determining, from the risk event data, a projected outcome of a risk event occurring; providing transaction data to specify a transaction in which one party exchanges a fixed payment for another party'"'"'s variable payment, the fixed payment related to the projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred, wherein each party provides a collateral position to ensure an ability to make the payment; periodically computing a mark to market measurement to determine whether one of the parties should make a change to the collateral position to ensure an ability to account for a difference between the actual outcome to the projected outcome, and if the change should be made, to determine an amount of the change.

Claims

1. A computer-aided method of exchanging payments between parties related to uncertainty of risk, the method including the steps of:

producing a path dependent projected outcome of a risk event occurring;

specifying a transaction in which each of two parties provides a collateral position;

accounting, as part of the transaction, for one said party exchanging a fixed payment for another said party'"'"'s variable payment, the fixed payment related to the projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred;

periodically computing a mark to market measurement to determine whether one of the parties should make a change to the collateral position to ensure an ability to account for a difference between the actual outcome to the projected outcome, and if the change should be made, to determine an amount of the change; and

wherein at least one of the steps is carried out by a computer system.

2. The method of claim 1, wherein the risk is an insurance risk.

3. The method of claim 1, wherein the risk is longevity risk.

4. The method of claim 1, wherein the risk is wind risk.

5. The method of claim 1, wherein the risk is a reinsurance risk.

6. The method of claim 1, wherein the risk is a reinsurance risk for life insurance.

7. The method of claim 1, wherein the risk is third party liability.

8. The method of claim 1, wherein the risk is interrupted operation.

9. The method of claim 1, wherein the risk is interrupted business.

10. The method of claim 2, wherein the insurance is life insurance.

11. The method of claim 2, wherein the insurance is an annuity.

12. The method of claim 2, wherein the insurance is property insurance.

13. The method of claim 2, wherein the insurance is casualty insurance.

14. The method of claim 2, wherein the insurance is health insurance.

15. A computer-aided method of exchanging payments between parties related to uncertainty of risk, the method including the steps of:

producing a projected outcome of a risk event occurring;

specifying a transaction in which each of two parties provides a collateral position;

accounting, as part of the transaction, for one said party exchanging a fixed payment for another said party'"'"'s variable payment, the fixed payment related to the projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred;

periodically computing a mark to market measurement to determine whether one of the parties should make a change to the collateral position to ensure an ability to account for a difference between the actual outcome to the projected outcome, and if the change should be made, an amount of the change; and

wherein at least one of the steps is carried out by a computer system.

16. A computer-aided method of exchanging payments between parties related to uncertainty of risk, the method including the steps of:

producing a projected outcome of having a risk event occurring;

specifying a transaction in which one party exchanges a fixed payment related to the projected outcome for another party paying a variable payment related to what actually occurs, wherein the parties agree to collateralize their payments;

forming a periodic mark to market to account for a difference between the projected outcome and said what actually occurs, relating the mark to market in changing a collateral amount to ensure that at least one of the parties can make its payment; and

wherein at least one of the steps is carried out by a computer system.

17. A computer-aided method of exchanging payments between parties related to uncertainty of risk, the method including the steps of:

entering risk event data;

determining, from the risk event data, a projected outcome of a risk event occurring,

providing transaction data to specify a transaction in which one party exchanges a fixed payment for another party'"'"'s variable payment, the fixed payment related to the projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred, wherein each party provides a collateral position to ensure an ability to make the payment;

periodically computing a mark to market measurement to determine whether one of the parties should make a change to the collateral position to ensure an ability to account for a difference between the actual outcome to the projected outcome, and if the change should be made, to determine an amount of the change; and

wherein at least one of the steps is carried out by a computer system.

18. A computer-aided method of monitoring a transaction, the method including the steps of:

entering risk event data;

determining, from the risk event data, a projected outcome of a risk event occurring,

providing transaction data to specify a transaction in which one party exchanges a fixed payment for another party'"'"'s variable payment, the fixed payment related to a projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred, wherein each said party provides a collateral position to ensure an ability to make a payment;

comparing the actual outcome with the project outcome at a subsequent time;

if, at the subsequent time, a difference between the actual outcome and the projected outcome exceeds the collateral position of either of the parties, then signaling for a change in one of the collateral positions; and

wherein at least one of the steps is carried out by a computer system.

19. A computer-aided method of exchanging payments between parties related to uncertainty of risk, the method including the steps of:

producing a projected outcome of a risk event occurring;

specifying a transaction in which each of two parties provides a collateral position;

accounting, as part of the transaction, for one said party exchanging a fixed payment for another said party'"'"'s variable payment, the fixed payment related to the projected outcome of the risk event occurring, the variable payment related to actual outcome of the risk event having occurred;

periodically computing a mark to market measurement to determine whether one of the parties should make a change to the collateral position to ensure an ability to account for a difference between the actual outcome to the projected outcome, and if the change should be made, an amount of the change; and

wherein at least one of the steps is carried out by a computer system.

20. A computer-aided method for accounting, the method including the steps of:

computing a fixed payment that can be made in the future in exchange for a variable amount based on a formula that includes actual mortality performance of at least one individual and a target survival date for the at least one individual;

determining a financial loss to party looking to hedge a risk that the mortality performance will differ from the target survival date; and

accounting for a contract including the exchange, the accounting including securing at least one payment for each of the parties with an initial margin and periodically marking to market the contract until its maturity.

21. The method according to claim 20, wherein the exchange is not insurance or reinsurance.

22. A computer system comprising:

a computer system comprising an input device, for changing input information into input electrical signals, and output device for changing output signals into human-readable output, and at least one processor programmed to control the system to carry out the operations of;

determining a target survival date for the insured;

establishing a financial loss to a party to a contract looking to hedge the risk, the contract including another party;

establishing a formula for determining a variable payment in the future;

determining, for the parties, a fixed payment to be made in exchange for the variable payment;

recording each of the parties obligations with an initial margin; and

periodically marking to market the underlying contract until its maturity.

23. A computer-aided method for estimating the financial consequences of a longer than expected life of the pool, the method comprising the steps of:

determining a life expectancy of an insured;

determining at least one fixed payment that can be exchanged for at least one variable payment, each of the payments formulaically related to the life expectancy and actual experience;

determining at least one amount corresponding to each of the at least one fixed payment and the at least one variable payment, each amount related to ability to make one of the payments, the ability determined by assessing at least one of an increased interest cost, a decline collateral value, and an inability to repay a debt.

24. The method in accordance with claim 23, further including the steps of:

creating a contract for a risk transfer, wherein the risk is formulaically related to the life expectancy and the actual experience; and

generating documentation for the risk transfer including insertion of a computed number into the documentation.

25. A computer-aided method supporting a transfer of financial consequences for an individual or pool of individuals not living to their expected life expectancy, the method comprising:

determining a target survival date for an insured;

determining a fixed payment;

determining, by a formula that includes the target survival date, a variable payment to be made in exchange for receiving the fixed payment,

determining standard deviations in a calculation of at least one margin requirement for making the exchange; and

marking to market to determine a collateral requirement for making at least one future payment.

26. A computer-readable medium for use in a computer system having a display and including a database management system or spread sheet which stores data, said computer readable medium being encoded with a computer program for managing a plurality of data that defines attributes of an insured, the data including at least one of an insured'"'"'s age at issue, sex, occupation, population mortality experience, insurance and annuity buyers mortality experience, expected rates of futures mortality improvements, family medical history, and/or the insured'"'"'s own medical history, the computer-readable medium comprising:

instructions for causing the computer system to determine a target survival date for the insured, a fixed payment, and a variable payment to exchange for the fixed payment, and to recalculating life expectancy and marking to market to determine whether a change in collateral position is necessary.

27. The computer-readable medium according to claim 26, wherein the medium is one of a CD-ROM, a floppy disk, a Zip cartridge, a magnetic media, and an optical wave.