Interest Rate Swap Compression

• US 20150379643A1
• Filed: 06/25/2015
• Published: 12/31/2015
• Est. Priority Date: 06/27/2014
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Boberski, David Andrew, Labuszewski, John, Wiley, John, Bawadhankar, Dhiraj, Sharaby, Fateen, O'Connell, Michael, Azzarello, Samantha
• Granted Patent: US 10,810,671 B2
• Time in Patent Office: Days
• US Class Current: 1/1
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer system may access data corresponding to a portfolio that comprises interest rate swaps and may calculate parameters for a compressed swap. The computer system may determine, based at least in part on the parameters for the compressed swap, a performance bond requirement attributable to the interest rate swaps. The computer system may compare the performance bond requirement to account data associated with a holder of the portfolio and may perform one or more additional actions based on the comparing.

Claims

1. A method comprising:

accessing, by a computer system, data corresponding to a portfolio that comprises m interest rate swaps, wherein m is an integer greater than one, wherein the accessed data comprises, for each of the interest rate swaps, a notional value and a fixed rate value, and wherein each of the interest rate swaps corresponds to a common tenor;

calculating, by the computer system, parameters for a compressed swap having a risk value equivalent to a sum of risk values of the interest rate swaps, wherein the parameters include a compressed swap notional value N_B, a compressed swap fixed rate value x_B, and a compressed swap floating rate spread value c;

determining, by the computer system and based at least in part on the compressed swap parameters, a performance bond requirement attributable to the interest rate swaps;

comparing, by the computer system, the performance bond requirement to account data associated with a holder of the portfolio; and

performing, by the computer system, one or more additional actions based on the comparing.

2. The method of claim 1, wherein performing additional actions comprises at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.

3. The method of claim 1, wherein

calculating the parameters for the compressed swap comprises calculating the compressed swap fixed rate value x_B, the compressed swap notional value N_B, and the compressed swap floating rate spread value c according to

4. The method of claim 3, wherein calculating the parameters for the compressed swap comprises accessing swap curve data comprising values for f_g, df_g, and dt_g.

5. The method of claim 1, wherein

a DV01 value for the compressed swap is the same as the sum of DV01 values for the interest rate swaps, and

a CV01 value for the compressed swap is the same as the sum of CV01 values for the interest rate swaps.

6. The method of claim 1, wherein

determining the performance bond requirement attributable to the multiple interest rate swaps comprises determining a performance bond requirement based on first and second disaggregated swaps,

the first disaggregated swap comprises the compressed swap fixed rate value x_B, a first disaggregated swap notional value N_B1, and a first disaggregated swap spread value c₁, and

the second disaggregated swap comprises the compressed swap fixed rate value x_B, a second disaggregated swap notional value N_B2, and a second disaggregated swap spread value c₂, and further comprising:

determining a required precision for the floating rate spread value c;

determining the required precision is greater than an available precision;

based on the determining that the required precision is greater than an available precision, selecting a c₁ value greater than the c value and a c₂ value less than the c value; and

determining N_B1 and N_B2 values such N_B1*c₁+N_B2*c₂=N_B*c and such that N_B1+N_B2=N_B.

7. The method of claim 6, wherein

determining the required precision comprises determining the required precision according to

8. One or more non-transitory computer-readable media storing computer executable instructions that, when executed, cause a computer system to perform operations that include:

accessing data corresponding to a portfolio that comprises m interest rate swaps, wherein m is an integer greater than one, wherein the accessed data comprises, for each of the interest rate swaps, a notional value and a fixed rate value, and wherein each of the interest rate swaps corresponds to a common tenor;

calculating parameters for a compressed swap having a risk value equivalent to a sum of risk values of the interest rate swaps, wherein the parameters include a compressed swap notional value N_B, a compressed swap fixed rate value x_B, and a compressed swap floating rate spread value c;

determining, based at least in part on the compressed swap parameters, a performance bond requirement attributable to the interest rate swaps;

comparing the performance bond requirement to account data associated with a holder of the portfolio; and

performing one or more additional actions based on the comparing.

9. The one or more non-transitory computer-readable media of claim 8, wherein performing additional actions comprises at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.

10. The one or more non-transitory computer-readable media of claim 8, wherein

calculating the parameters for the compressed swap comprises calculating the compressed swap fixed rate value x_B, the compressed swap notional value N_B, and the compressed swap floating rate spread value c according to

11. The one or more non-transitory computer-readable media of claim 10, wherein calculating the parameters for the compressed swap comprises accessing swap curve data comprising values for f_g, df_g, and dt_g.

12. The one or more non-transitory computer-readable media of claim 8, wherein

a DV01 value for the compressed swap is the same as the sum of DV01 values for the interest rate swaps, and

a CV01 value for the compressed swap is the same as the sum of CV01 values for the interest rate swaps.

13. The one or more non-transitory computer-readable media of claim 8, wherein

determining the performance bond requirement attributable to the multiple interest rate swaps comprises determining a performance bond requirement based on first and second disaggregated swaps,

the first disaggregated swap comprises the compressed swap fixed rate value x_B, a first disaggregated swap notional value N_B1, and a first disaggregated swap spread value c₁, and

the second disaggregated swap comprises the compressed swap fixed rate value x_B, a second disaggregated swap notional value N_B2, and a second disaggregated swap spread value c₂, and further comprising stored computer executable instructions that, when executed, cause the computer system to perform operations that include:

determining a required precision for the floating rate spread value c;

determining the required precision is greater than an available precision;

based on the determining that the required precision is greater than an available precision, selecting a c₁ value greater than the c value and a c₂ value less than the c value; and

determining N_B1 and N_B2 values such N_B1*c₁+N_B2*c₂=N_B*c and such that N_B1+N_B2=N_B.

14. The one or more non-transitory computer-readable media of claim 13, wherein

determining the required precision comprises determining the required precision according to

15. A computer system comprising:

at least one processor; and

at least one non-transitory memory, wherein the at least one non-transitory memory stores instructions that, when executed, cause the computer system to perform operations that include

accessing data corresponding to a portfolio that comprises m interest rate swaps, wherein m is an integer greater than one, wherein the accessed data comprises, for each of the interest rate swaps, a notional value and a fixed rate value, and wherein each of the interest rate swaps corresponds to a common tenor,

calculating parameters for a compressed swap having a risk value equivalent to a sum of risk values of the interest rate swaps, wherein the parameters include a compressed swap notional value N_B, a compressed swap fixed rate value x_B, and a compressed swap floating rate spread value c,

determining, based at least in part on the compressed swap parameters, a performance bond requirement attributable to the interest rate swaps,

comparing the performance bond requirement to account data associated with a holder of the portfolio, and

performing one or more additional actions based on the comparing.

16. The computer system of claim 15, wherein performing additional actions comprises at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.

17. The computer system of claim 15, wherein

calculating the parameters for the compressed swap comprises calculating the compressed swap fixed rate value x_B, the compressed swap notional value N_B, and the compressed swap floating rate spread value c according to

18. The computer system of claim 17, wherein calculating the parameters for the compressed swap comprises accessing swap curve data comprising values for f_g, df_g, and dt_g.

19. The computer system of claim 15, wherein

a DV01 value for the compressed swap is the same as the sum of DV01 values for the interest rate swaps, and

a CV01 value for the compressed swap is the same as the sum of CV01 values for the interest rate swaps.

20. The computer system of claim 15, wherein

determining the performance bond requirement attributable to the multiple interest rate swaps comprises determining a performance bond requirement based on first and second disaggregated swaps,

the first disaggregated swap comprises the compressed swap fixed rate value x_B, a first disaggregated swap notional value N_B1, and a first disaggregated swap spread value c₁, and

the second disaggregated swap comprises the compressed swap fixed rate value x_B, a second disaggregated swap notional value N_B2, and a second disaggregated swap spread value c₂, and wherein the at least one non-transitory memory stores instructions that, when executed, cause the computer system to perform operations that include

determining a required precision for the floating rate spread value c,

determining the required precision is greater than an available precision,

based on the determining that the required precision is greater than an available precision, selecting a c₁ value greater than the c value and a c₂ value less than the c value, and

determining N_B1 and N_B2 values such N_B1*c₁+N_B2*c₂=N_B*c and such that N_B1+N_B2=N_B.

21. The computer system of claim 20, wherein

determining the required precision comprises determining the required precision according to