Method and system for generating and trading derivative investment instruments based on a volatility arbitrage benchmark index

• US 8,140,425 B2
• Filed: 10/19/2007
• Issued: 03/20/2012
• Est. Priority Date: 11/13/2006
• Status: Active Grant

• Current Assignee: Cboe Exchange, Inc. (Cboe Global Markets, Inc.)
• Original Assignee: Chicago Board Options Exchange Incorporated (Cboe Global Markets, Inc.)
• Inventors: Hiatt, John C. Jr.
• Primary Examiner(s): Subramanian, Narayanswamy
• Assistant Examiner(s): Robinson, Kito R
• Application Number:
  US11/875,572
• Publication Number:
  US 20080154790A1
• Time in Patent Office: 1,614 Days
• Field of Search: 705/37, 705/36.R
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• 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 system and method for creating a volatility arbitrage bench mark index is disclosed. The method includes obtaining closing prices of an underlying instrument, such as a derivative investment instrument, and calculating a value representing a volatility arbitrage benchmark. The value may be displayed at a trading facility and volatility arbitrage benchmark quotes may be transmitted by the trading facility to a market participant.

Claims

1. A system for creating and trading derivatives based on a volatility arbitrage benchmark of an underlying asset, comprising:

a volatility arbitrage benchmark index module comprising a first processor, a first memory coupled with the first processor, and a first communications interface coupled with a communications network, the first processor, and the first memory;

a dissemination module coupled with the volatility arbitrage benchmark index module, the dissemination module comprising a second processor, a second memory coupled with the second processor, and a second communications interface coupled with the communications network, the second processor, and the second memory;

a first set of logic, stored in the first memory and executable by the first processor to receive current values for an underlying asset of a volatility arbitrage benchmark derivative through the first communications interface, calculate a volatility arbitrage benchmark value for the underlying asset, pass the value for the calculated volatility arbitrage benchmark to the dissemination module, wherein the first set of logic is configured to cause the first processor to calculate the volatility arbitrage benchmark value according to a formula;

2. The system of claim 1, further comprising:

a trading module coupled with the dissemination module, the trading module comprising a third processor, a third memory coupled with the third processor, and a third communications interface coupled with the communications network, the third processor, and the third memory;

a third set of logic, stored in the third memory and executable by the third processor, to receive at least one buy or sell order over the communications network;

execute the buy or sell order; and

pass a result of the buy or sell order to the dissemination module; and

a fourth set of logic, stored in the second memory and executable by the second processor to receive the result of the buy or sell order from the trading module and disseminate the result of the buy or sell order through the second communications network to the at least one market participant.

3. A system for creating and trading derivatives based on a volatility arbitrage benchmark of an underlying asset, comprising:

a volatility arbitrage benchmark index module coupled with a communications network, the volatility arbitrage benchmark index module having a processor configured for receiving current values of an underlying asset of a derivative investment instrument and calculating a volatility arbitrage benchmark value of the underlying asset, wherein the processor is configured to calculate the volatility arbitrage benchmark value according to a formula;