Leverage margin monitoring and management

• US 7,577,601 B1
• Filed: 06/20/2000
• Issued: 08/18/2009
• Est. Priority Date: 03/30/2000
• Status: Expired due to Term

• Current Assignee: UBS Business Solutions AG (UBS Ag)
• Original Assignee: UBS Ag
• Inventors: Adkisson, David, Maloy, David, Rademacher, Robert
• Primary Examiner(s): Poinvil, Frantzy
• Application Number:
  US09/597,881
• Time in Patent Office: 3,346 Days
• Field of Search: 705 10- 44
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A computerized system and method to manage and monitor leverage relating to financial transactions whereby counterparty credit risks are enhanced and capital and credit efficiency is promoted by taking a perfected security interest in the counterparty. An aggregate net exposure relating to financial positions held by an identified counterparty is calculated, wherein positions can be held in multiple market segments. A value is determined for collateral dedicated to offset the net exposure. Leverage relating to the ratio of the collateral value and the exposure can be managed to offset the exposure. Monitoring of leverage can be accomplished in real time, or on a predetermined schedule. Exposure can be quantified as a monetary value in a local currency and/or quantified according to market data. In addition the present invention can be used to offset risk associated with online transactions, such as a sale of goods, wherein a currency amount committed to the online transaction is included in a net exposure aggregation. Collateral can be dedicated to offset the net exposure.

Claims

1. A method for management and monitoring of leverage relating to financial transactions, the method comprising steps of:

identifying an entity;

identifying at least one market segment in which the entity holds financial positions;

quantifying an aggregate net exposure relating to the financial positions held by the identified entity, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross-product netting and cross-agreement netting;

quantifying said aggregate net exposure across the identified market segment or segments;

determining a value for collateral dedicated to offset the exposure;

and managing leverage relating to the collateral to offset the exposure,

wherein at least one of the steps is performed by a computer.

2. The method of claim 1, wherein the identified market segment or segments relate to specific industries.

3. The method of claim 1, wherein the aggregate net exposure is quantified according to market data using a calculation of the median of multiple values.

4. The method of claim 1, additionally comprising managing the leverage according to rules specific to conditions and requirements of a particular identified market segment.

5. The method of claim 1, wherein the leverage is managed across market segments.

6. The method of claim 1, wherein the entity comprises a volume purchase group.

7. The method of claim 1, wherein managing leverage comprises monetizing unrealized positions from at least one of the identified market segments to cross-fund positions in another market segment.

8. The method of claim 1, additionally comprising computing net exposure values separately for financial product groupings and accumulating product grouping totals according to a parent entity.

9. The method of claim 1, additionally comprising accumulating market product segments forming a composite of exposure across market segments.

10. The method of claim 1, wherein the exposure relates to a particular entity.

11. The method of claim 1, wherein the exposure relates to a particular industry.

12. A method of managing collateral for financial transactions, the method comprising the steps of:

settling a trade consummating a financial deal relating to a particular market segment;

monitoring exposure levels across market segments to determine if exposure remains within a predetermined tolerance by performing the steps of;

identifying an entity;

identifying at least one market segment in which the entity holds financial positions;

quantifying an aggregate net exposure relating to the financial positions held by the identified entity, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross-product netting and cross-agreement netting;

quantifying said aggregate net exposure across the identified market segment or segments;

determining a value for collateral dedicated to offset the exposure; and

initiating communication for additional collateral resultant to the exposure exceeding a predetermined tolerance,

wherein at least one of the steps is performed using a computer.

13. The method of claim 12, wherein the market segments relate to specific industries.

14. A method for the management and monitoring of leverage relating to financial transactions, the method comprising the steps of:

identifying entities;

identifying a market segment in which the entities hold financial positions;

quantifying an aggregate net exposure resulting from the financial positions held by the identified entities, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross-product netting and cross-agreement netting;

quantifying said aggregate net exposure across the identified market segment or segments;

determining a value for collateral dedicated to offset the net exposure; and

managing leverage related to the collateral to offset the exposure,

wherein at least one of the steps is performed using a computer.

15. The method of claim 14 wherein the market segment relates to a specific industry.

16. The method of claim 14, wherein the leverage is managed across the identified market segment or segments.

17. A computer system for managing leverage relating to a financial position, the system comprising:

a processor;

a storage medium;

programmable code stored in the storage medium and operative with the processor to;

identify an entity or hierarchy of related entities;

identify at least one market segment in which the entity or hierarchy of entities hold financial positions;

quantify an aggregate net exposure relating to the financial positions of the entity or hierarchy of entities, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross product and cross-agreement netting;

quantify said aggregate net exposure resulting from the identified entity, or hierarchy of related entities, across the identified market segment or segments;

determine a value for collateral dedicated to offset the exposure; and

manage leverage of the collateral.

18. The system of claim 17, wherein the leverage is managed across the identified market segments.

19. Computer executable program code residing on a computer-readable medium, the program code comprising instructions for causing the computer to:

identify an entity;

identify at least one market segment in which the entity holds financial positions;

quantify an aggregate net exposure relating to the financial positions held by the identified entity, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross-product netting and cross-agreement netting;

quantify said aggregate net exposure across the identified market segment or segments;

determine a value for collateral dedicated to offset the exposure;

and manage leverage relating to the collateral to offset the exposure.

20. A method of interacting with a network access device for providing leverage management of collateral, the method comprising the steps of:

accessing a server on a computer network;

receiving data relating to an exposure, wherein the exposure is resultant to an aggregation of financial positions held by an entity in multiple market segments;

receiving data relating to the exposure in specific market segments;

determining a value for collateral dedicated to offset the exposure using cross-agreement netting and cross-product netting by performing the steps comprising;

identifying an entity;

identifying at least one market segment in which the entity holds financial positions;

quantifying an aggregate net exposure relating to the financial positions held by the identified entity, wherein the financial positions are held in multiple products and multiple market segments and the aggregate net exposure is quantified using cross-product netting and cross-agreement netting;

quantifying said aggregate net exposure across the identified market segment or segments;

and managing leverage created by the ratio of the collateral to the exposure,

wherein at least one of the steps is performed by a computer.

21. A computer system comprising one or more computers, said one or more computers having a screen comprising:

a first area containing a description of a trading entity;

a second area containing an aggregate exposure resulting from the trading entity having financial positions in multiple market segments that is calculated on a computer using cross-product netting and cross-agreement netting; and

a third area containing a recommended action relating to a current percentage margin relating to the aggregate exposure, wherein said recommended action is determined using information in said second area.

22. The computer system of claim 21, additionally comprising a Party-Counterparty view mode selector.

23. The computer system of claim 21, additionally comprising an area displaying a net replacement value.

24. The computer system of claim 21, additionally comprising an area displaying a required margin for a product or market area.

25. The computer system of claim 21, additionally comprising an area displaying collateral confirmed settled from a custodian.

26. The computer system of claim 21, additionally comprising an area displaying collateral pledged but not yet confirmed settlement from a custodian.

27. The computer system of claim 21, additionally comprising an area displaying a choice box for translating a monetary value into different currencies.