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Method for managing risk in markets related to commodities delivered over a network

  • US 7,567,926 B2
  • Filed: 09/28/2005
  • Issued: 07/28/2009
  • Est. Priority Date: 03/11/1999
  • Status: Expired due to Fees
First Claim
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1. A method for evaluating a portfolio of price risk instruments in a market related to a commodity delivered over a network, comprising the steps of:

  • a computer estimating a plurality of distribution factors indicating effects on one or more congestible lines in the network due to transfers of the commodity at respective locations in the network; and

    a computer evaluating the portfolio based on the estimated distribution factors,wherein the step of evaluating the portfolio includes a step of calculating a cost f based on the formula f=(z′

    A−

    y′

    P′

    A)λ

    +y′

    F, wherein;

    y represents the portfolio of price risk instruments;

    z represents underlying positions in the market at the prospective time;

    P represents a market of available price risk instruments;

    F represents prices for the available price risk instruments;

    A represents the distribution factors;

    λ

    represents prices of congestion for the congestible lines; and



    (prime) denotes a transpose of a matrix.

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