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System and Method for Creating and Trading a Digital Derivative Investment Instrument

  • US 20100153254A1
  • Filed: 10/07/2009
  • Published: 06/17/2010
  • Est. Priority Date: 10/08/2008
  • Status: Active Grant
First Claim
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1. A computer implemented method of creating a financial instrument comprising:

  • establishing a plurality of credit event categories with a digital derivative contract definition module in an exchange backend system, wherein an entity'"'"'s credit event status is associated with at least one of said plurality of credit event categories;

    establishing, with a binary variable monitoring module, a digital derivative contract based on the entity and having a premium in which an investor will receive one of a first settlement amount when the entity is associated with a credit event status or a second settlement amount when the entity is not associated with the credit event status; and

    calculating a settlement amount for the digital derivative contract with a settlement calculation module in the exchange backend system according to whether the credit event status is associated with the entity or not associated with to the entity.

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