Methods and apparatus relating to the formulation and trading of investment contracts

• US 7,617,147 B2
• Filed: 07/10/2003
• Issued: 11/10/2009
• Est. Priority Date: 07/07/1995
• Status: Expired due to Fees

• Current Assignee: Alice Corporation Pty Limited
• Original Assignee: Alice Corporation Pty Limited
• Inventors: Shepherd, Ian Kenneth
• Primary Examiner(s): Trammell; James P
• Assistant Examiner(s): GREENE, DANIEL LAWSON
• Application Number:
  US10/615,796
• Publication Number:
  US 20040059667A1
• Time in Patent Office: 2,315 Days
• Field of Search: 705/35.36 R, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• 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 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A data processing system to enable the formulation of multi-party investments contracts is disclosed. The system comprises input means by which an ordering party can input contract data relating to at least one phenomenon, the phenomenon having a range of future outcomes and a future time of maturity. The contract data further includes a set of probabilities of occurrence for each outcome in the range and a consideration due to a counterparty at or after the time of maturity. One or more counterparties can input registering data including a set of probabilities of occurrence for each outcome in the range. The system further includes a data processor that is operable to price and match a contract from the contract data and the registering data.

Claims

1. A system to enable the formulation of a multi-party investment contract, comprising:

receiving means for electronically receiving from an ordering party contract data relating to at least one phenomenon, each said phenomenon having two possible future outcomes and a future time of maturity, said contract data including a view as to which of the two possible future outcomes will be the outcome at maturity and a consideration due to a counterparty at or after a time of matching, and for electronically receiving from at least one counterparty registering data including a view as to each of the two possible future outcomes; and

a data processor configured to electronically price a contract for said phenomenon from said contract data and said registering data, including;

applying at least one template of entitlement as a function of outcome to each counterparty'"'"'s view to give one or more individual counterparty prices each equal to said consideration, and

applying said ordering party view to each said template of entitlement to derive one or more implied entitlement valuations; and

electronically match a contract for said phenomenon from said contract data and registering data, including;

determining which counterparty will provide the best entitlement on maturity by comparing each implied entitlement valuation with said consideration, and

matching the contract with that counterparty having a template of entitlement for the best said comparison.

2. The system of claim 1, wherein, in the pricing, application of a template of entitlement results in the multiplication of each elemental entitlement with each probability, and the summing of the products.

3. The system of claim 2, further wherein a discount factor is applied to the sum to give a present day price relative to the time of maturity.

4. The system of claim 1, wherein, in the pricing, each template of entitlement is applied to the ordering party set of probabilities, and a multiplication of the elemental entitlements with each probability performed, and the products summed to give the implied entitlement valuation.

5. The system of claim 4, wherein the said sum has a discount rate applied to give a present day value relative to the time of maturity.

6. The system of claim 1, wherein the contract data further include a minimum expected entitlement against which the counterparty prices are compared for the purpose of accepting ones thereof for the matching.

7. The system of claim 1, wherein the contract data include a constraint on the one or more templates of entitlement applied by the data processing means.

8. The system of claim 1, wherein the data processing means periodically reprices the contract data for a matched contract to derive one or more implied entitlement valuations for one or more counterparties.

9. A data processing system to enable the formulation of potential multiparty investment contracts, the system comprising:

receiving means for electronically receiving contract data relating to a least one phenomenon, each said phenomenon having a range of future outcomes and a future time of maturity, the contract data including a set of probabilities of occurrence for each outcome in said range and a consideration due to a counterparty at or after the time of matching, and for receiving electronically registering data including a set of probabilities of occurrence for each outcome in said range; and

a data processor configured to electronically price a contract for a said phenomenon from said contract data and said registering data, including;

applying at least one template of entitlement as a function of outcome to each counterparty'"'"'s set of probabilities to give one or more individual counterparty prices each equal to the ordering party'"'"'s consideration; and

applying the ordering party set of probabilities to each said template of entitlement to derive an implied entitlement valuation.

10. A data processing system to enable the formulation of potential multi-party investments contracts, the system comprising:

receiving means for electronically receiving contract data relating to at least one phenomenon, each said phenomenon having a range of future outcomes and a future time of maturity, the contract data including a set of probabilities of occurrence for each outcome in said range and a consideration due to a counterparty at or after the time of matching, and for electronically receiving registering data including a set of probabilities of occurrence for each outcome in said range; and

a data processor configurable to electronically price a contract for said phenomenon from said contract data and said registering data, including;

dividing the consideration into components, and for each component;

applying at least one template of entitlement as a function of outcome to each counterparty'"'"'s set of probabilities to give one or more individual counterparty prices each equal to the ordering party'"'"'s component consideration; and

applying the ordering party set of probabilities to each said template of entitlement to derive an implied component entitlement valuation; and

electronically match said contract for said phenomenon from said contract data and said registering data, including;

determining which counterparty will provide the best entitlement on maturity by comparing each implied component entitlement valuation with the consideration; and

matching the contract with the counterparties having templates of entitlement for the best said component comparisons.