SCANNING BASED SPREADS USING A HEDGE RATIO NON-LINEAR OPTIMIZATION MODEL
First Claim
Patent Images
1. A method for identifying a portfolio having both a substantially neutral delta and optimal margin credit therefore, the method comprising:
- evaluating a plurality of portfolios, each portfolio containing at least two products and differing from other portfolios of the plurality of portfolio based on the quantities of the at least two products contained therein, the quantities of each of the at least two products specified to achieve a delta substantially close to neutral for the portfolio, each portfolio being further characterized by at least one spread between the at least two products, each of the at least one spread being associated with an implied credit and a target credit;
aggregating, for each portfolio of the plurality of portfolios, differences between the implied credits and the target credits for each of the at least one spread; and
identifying an optimal portfolio as the portfolio of the plurality of portfolios whose aggregate difference indicates a greater number of the at least one spread with an implied credit closest to the target credit than other portfolios of the plurality of portfolios.
1 Assignment
0 Petitions
Accused Products
Abstract
The disclosed embodiments utilize hedge ratios to determine the optimal hedge ratio and associated scanning spread. This tells traders what ratios of the quantities of products they should have in their portfolio in order to maintain the status of the portfolios as delta neutral, i.e. be delta hedged, and receive optimal margin credits therefore.
-
Citations
20 Claims
-
1. A method for identifying a portfolio having both a substantially neutral delta and optimal margin credit therefore, the method comprising:
-
evaluating a plurality of portfolios, each portfolio containing at least two products and differing from other portfolios of the plurality of portfolio based on the quantities of the at least two products contained therein, the quantities of each of the at least two products specified to achieve a delta substantially close to neutral for the portfolio, each portfolio being further characterized by at least one spread between the at least two products, each of the at least one spread being associated with an implied credit and a target credit; aggregating, for each portfolio of the plurality of portfolios, differences between the implied credits and the target credits for each of the at least one spread; and identifying an optimal portfolio as the portfolio of the plurality of portfolios whose aggregate difference indicates a greater number of the at least one spread with an implied credit closest to the target credit than other portfolios of the plurality of portfolios. - View Dependent Claims (2, 3, 4, 5)
-
-
6. A system for identifying a portfolio having both a substantially neutral delta and optimal margin credit therefore, the system comprising:
-
a portfolio processor operative to evaluate a plurality of portfolios, each portfolio containing at least two products and differing from other portfolios of the plurality of portfolio based on the quantities of the at least two products contained therein, the quantities of each of the at least two products specified to achieve a delta substantially close to neutral for the portfolio, each portfolio being further characterized by at least one spread between the at least two products, each of the at least one spread being associated with an implied credit and a target credit; the portfolio processor including; an aggregation processor operative to aggregate, for each portfolio of the plurality of portfolios, differences between the implied credits and the target credits for each of the at least one spread; and a portfolio identifier coupled with the aggregation processor and operative to identify an optimal portfolio as the portfolio of the plurality of portfolios whose aggregate difference indicates a greater number of the at least one spread with an implied credit closest to the target credit than other portfolios of the plurality of portfolios. - View Dependent Claims (7, 8, 9, 10)
-
-
11. A method of computing quantities of each of a plurality of derivative products to include in a portfolio, each of the plurality of derivative products being characterized by a product position based on underlying product and a product delta representative of a sensitivity of the product position to change in price of the underlying product, the portfolio being characterized by a portfolio delta representative of a net sum of the product delta of each of the plurality products included in the portfolio, the quantities being computed so as to optimize credit towards a margin requirement for the portfolio while maintaining the portfolio delta of the portfolio substantially close to zero, the method comprising:
-
for at least one product of the plurality of products, identifying an exemplary set of first quantities of the at least one product and for each first quantity of the at least one product of the set of first quantities; computing second quantities of each of the other of the plurality of products such that the product delta of the second quantity of each of the other of the plurality of products substantially offsets the product delta associated with the first quantity of the at least one product; and for each spread combination of the first and second quantities of the at least one product and the other of the plurality of products; computing an implied margin for the spread combination; computing an outright margin for the spread combination; computing an implied credit rate for the spread combination based on the implied margin and the outright margin for the spread combination; computing a difference between the implied credit rate and the target credit rate for the spread combination; generating a sum of each computed difference for each spread combination of the selected quantity of the at least one product; and
wherein the method further includes;identifying a target quantity of the at least one product of the set of quantities having the lowest summed computed difference, the target quantity of the at least one product in conjunction with quantities of the other of the plurality of products, computed to offset the product delta associated with the target quantity of the at least one product, representing a portfolio having optimal credit towards a margin requirement for the portfolio while maintaining the portfolio delta of the portfolio substantially close to zero. - View Dependent Claims (12, 13, 14, 15, 16, 17, 18, 19)
-
-
20. A system for identifying a portfolio having both a substantially neutral delta and optimal margin credit therefore, the system comprising:
-
means for evaluating a plurality of portfolios, each portfolio containing at least two products and differing from other portfolios of the plurality of portfolio based on the quantities of the at least two products contained therein, the quantities of each of the at least two products specified to achieve a delta substantially close to neutral for the portfolio, each portfolio being further characterized by at least one spread between the at least two products, each of the at least one spread being associated with an implied credit and a target credit; means for aggregating, for each portfolio of the plurality of portfolios, differences between the implied credits and the target credits for each of the at least one spread; and means for identifying an optimal portfolio as the portfolio of the plurality of portfolios whose aggregate difference indicates a greater number of the at least one spread with an implied credit closest to the target credit than other portfolios of the plurality of portfolios.
-
Specification