Win, lose or draw derivative instruments
First Claim
1. A computer-implemented method of defining and listing a derivative product for trading on an exchange or over-the-counter trading platform, comprising:
- a) designating, by means of a programmed computer, a first price event above a reference price for a given underlying financial instrument and a first time frame for the first price event to occur;
b) designating, by means of a programmed computer, a second price event below the reference price for the given underlying financial instrument and a second time frame for the second price event to occur; and
c) designating, by means of a programmed computer, predetermined payoffs, wherein;
i) a first predetermined payoff is based at least in part on the occurrence of the first designated price event within the first designated time frame before the occurrence of the second designated price event within the second designated time frame; and
ii) a second predetermined payoff is based at least in part on the occurrence of the second designated price event within the second designated time frame before the occurrence of the first designated price event within first designated time frame.
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Accused Products
Abstract
Methods and systems are disclosed for listing and trading fixed-payoff derivative contracts between two parties based on the movement of an underlying financial instrument in a manner that eliminates the cost associated with a traditional option premium. The invention, henceforth referred to as a “Win, Lose or Draw” derivative contract, is a cash position for or against the occurrence of a designated price event above an underlying financial instrument'"'"'s spot price before the occurrence of a designated price event below an underlying financial instrument'"'"'s spot price, or vice versa, within a designated time period. If neither designated price event occurs within the designated time period, no loss of cash position is incurred by either party. Additional embodiments include the application of asset-backed contracts, transferable positions, multiple underlying financial instruments within the same contract, asymmetric time periods, and expirationless time periods.
6 Citations
34 Claims
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1. A computer-implemented method of defining and listing a derivative product for trading on an exchange or over-the-counter trading platform, comprising:
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a) designating, by means of a programmed computer, a first price event above a reference price for a given underlying financial instrument and a first time frame for the first price event to occur; b) designating, by means of a programmed computer, a second price event below the reference price for the given underlying financial instrument and a second time frame for the second price event to occur; and c) designating, by means of a programmed computer, predetermined payoffs, wherein; i) a first predetermined payoff is based at least in part on the occurrence of the first designated price event within the first designated time frame before the occurrence of the second designated price event within the second designated time frame; and ii) a second predetermined payoff is based at least in part on the occurrence of the second designated price event within the second designated time frame before the occurrence of the first designated price event within first designated time frame. - View Dependent Claims (2, 3, 4, 5)
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6. A computer-implemented method of executing a derivative contract between two parties, comprising:
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a) receiving and processing, by means of a programmed computer, a first order on behalf of a first party for a first cash or asset-backed position, the first position comprising parameters including at least a first predetermined payoff based at least in part on the occurrence of a first designated price event above a reference price for a given underlying financial instrument within a first predetermined time frame before the occurrence of a second designated price event below the reference price for the given underlying financial instrument within a second predetermined time frame; b) receiving and processing, by means of a programmed computer, a second order on behalf of a second party for a second cash or asset-backed position, the second position comprising parameters including at least a second predetermined payoff based at least in part on the occurrence of the second designated price event below the reference price for the given underlying financial instrument within the second predetermined time frame before the occurrence of the first designated price event above the reference price for the given underlying financial instrument within the first predetermined time frame; c) matching and processing, by means of a programmed computer, the first and second orders into a contract between the two parties; and d) determining the outcome and settling the contract between the two respective parties, by means of a programmed computer, wherein; i) the contract is settled in the first party'"'"'s favor by means of at least the first predetermined payoff if the first designated price event occurs within the first predetermined time frame before the second designated price event occurs within the second predetermined time frame; ii) the contract is settled in the second party'"'"'s favor by means of at least the second predetermined payoff if the second designated price event occurs within the second predetermined time frame before the first designated price event occurs within the first predetermined time frame; and iii) the contract is settled in neither party'"'"'s favor if neither designated price event occurs within the first or second predetermined time frames. - View Dependent Claims (7, 8, 9, 10, 11)
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12. A programmed computer system for executing a derivative contract between two parties, comprising:
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a) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to receive and process a first order on behalf of a first party for a first cash or asset-backed position, the first position comprising parameters including at least a first predetermined payoff based at least in part on the occurrence of a first designated price event above a reference price for a given underlying financial instrument within a first predetermined time frame before the occurrence of a second designated price event below the reference price for the given underlying financial instrument within a second predetermined time frame; b) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to receive and process a second order on behalf of a second party for a second cash or asset-backed position, the second position comprising parameters including at least a second predetermined payoff based at least in part on the occurrence of the second designated price event below the reference price for the given underlying financial instrument within the second predetermined time frame before the occurrence of the first designated price event above the reference price for the given underlying financial instrument within the first predetermined time frame; c) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to match and process the first and second orders into a contract between the two parties; and d) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to determine the outcome and settle the contract between the two parties, wherein; i) the contract is settled in the first party'"'"'s favor by means of at least the first predetermined payoff if the first designated price event occurs within the first predetermined time frame before the second designated price event occurs within the second predetermined time frame; ii) the contract is settled in the second party'"'"'s favor by means of at least the second predetermined payoff if the second designated price event occurs within the second predetermined time frame before the first designated price event occurs within the first predetermined time frame; and iii) the contract is settled in neither party'"'"'s favor if neither designated price event occurs within the first or second predetermined time frames. - View Dependent Claims (13, 14, 15, 16, 17)
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18. A computer-implemented method of defining and listing a derivative product for trading on an exchange or over-the-counter trading platform, comprising:
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a) designating, by means of a programmed computer, n price events relative to n corresponding reference prices for n corresponding underlying financial instruments; b) designating, by means of a programmed computer, a corresponding predetermined time frame for each of the n price events to occur; and c) designating, by means of a programmed computer, n predetermined payoffs, wherein any given predetermined payoff is based at least in part on the occurrence of one of the n designated price events within its corresponding predetermined time frame before the occurrence of any one of the n−
1 other designated price events within their respective corresponding predetermined time frames. - View Dependent Claims (19, 20, 21, 22)
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23. A computer-implemented method of executing a derivative contract between n parties, comprising:
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a) receiving and processing, by means of a programmed computer, n orders on behalf of n corresponding parties for n corresponding cash or asset-backed positions, wherein each of the n positions comprises parameters including at least a corresponding predetermined payoff based at least in part on the occurrence of a corresponding designated price event relative to a corresponding reference price for a corresponding underlying financial instrument within a corresponding predetermined time frame before the occurrence of any one of the n−
1 other designated price events within their respective corresponding predetermined time frames;b) matching and processing, by means of a programmed computer, the n orders into a contract between the n parties; and c) determining the outcome and settling the contract between the n parties, by means of a programmed computer, wherein; i) the contract is settled in any given party'"'"'s favor by means of at least the given party'"'"'s corresponding predetermined payoff if the given party'"'"'s corresponding designated price event occurs within its corresponding predetermined time frame before any one of the n−
1 other price events occurs within their respective corresponding predetermined time frames; andii) the contract is settled no party'"'"'s favor if none of the n designated price events occur within their respective corresponding predetermined time frames. - View Dependent Claims (24, 25, 26, 27, 28)
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29. A programmed computer system for executing a derivative contract between n parties, comprising:
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a) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to receive and process n orders on behalf of n corresponding parties for n corresponding cash or asset-backed positions, wherein each of the n positions comprises parameters including at least a corresponding predetermined payoff based at least in part on the occurrence of a corresponding designated price event relative to a corresponding reference price for a corresponding underlying financial instrument within a corresponding time frame before the occurrence of any one of the n−
1 other designated price events within their respective corresponding predetermined time frames;b) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to match and process the n orders into a contract between the n parties; and c) A computer processor operative to execute instructions from a computer program product embodied in a computer-readable medium to determine the outcome and settle the contract between the n parties, wherein; i) the contract is settled in any given party'"'"'s favor by means of at least the given party'"'"'s corresponding predetermined payoff if the given party'"'"'s corresponding designated price event occurs within its corresponding predetermined time frame before any one of the n−
1 other price events occurs within their respective corresponding predetermined time frames; andii) the contract is settled no party'"'"'s favor if none of the n designated price events occur within their respective corresponding predetermined time frames. - View Dependent Claims (30, 31, 32, 33, 34)
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Specification