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Method and system for creating and trading corporate debt security derivative investment instruments

  • US 8,027,904 B2
  • Filed: 04/21/2006
  • Issued: 09/27/2011
  • Est. Priority Date: 05/04/2005
  • Status: Active Grant
First Claim
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1. A computer executable method of creating and trading derivative investment instruments based on a corporate debt security, the method comprising:

  • identifying a credit rating service having a credit rating scheme that includes a plurality of risk categories using a corporate debt security derivative definition module on an exchange processor, wherein the credit rating service rates an entity'"'"'s credit worthiness by associating an appropriate one of said plurality of risk categories with the entity;

    the processor mapping the risk categories to unique prices;

    the processor identifying a particular entity which is rated by the credit rating service;

    creating a corporate debt security derivative investment instrument with the processor, wherein a value of the corporate debt security derivative investment instrument is determined at least in part by the unique price to which the risk category associated with the particular entity is mapped;

    transmitting pricing information with a pricing data accumulation and dissemination module on the processor to create a market for the corporate debt security derivative investment instrument; and

    determining, with a settlement module on the processor, appropriate settlement amounts for an executed trade of the corporate debt security derivative investment instrument based on information received at the processor from the credit rating service, wherein the settlement amounts are transmitted to a clearing entity.

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