Method of trading in real estate derivatives

• US 8,180,697 B2
• Filed: 05/18/2011
• Issued: 05/15/2012
• Est. Priority Date: 01/31/2007
• Status: Expired due to Fees

• Current Assignee: Paul Frischer
• Original Assignee: Paul Frischer
• Inventors: Frischer, Paul
• Primary Examiner(s): CAMPEN, KELLY SCAGGS
• Application Number:
  US13/110,551
• Publication Number:
  US 20110288981A1
• Time in Patent Office: 363 Days
• Field of Search: 705/36.R, 705/37, 705/35, 705/38, 705/26.1, 705/39, 705/1.1
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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
• CPC Class Codes: G06Q 50/16 Real estate

Abstract

A method of computing a real estate derivative index value includes: selecting asking rent data; selecting lease rent data; and combining the selected asking rent data and the selected lease rent data to form the index value. The method may further include further combining the combined data with a value representative of general market conditions; forming a composite index of data from plural markets; or computing the index at the end of a time period as:
ΔFKI or as ΔRP+ΔCPI+ΔFKI.
The method may further include trading based on the index by deriving a trade value from the index value, and executing a trade based on the derived trade value. The method may be carried as instructions on a machine-readable medium and may be carried out using a computer for part or all of the method.

Claims

1. A method of trading a real estate derivative index, the method comprising:

generating, by a processor, a real estate derivative index value, the real estate derivative index value generated according to;

Δ

FKI=(R1−

R0)/(R0)*100, wherein,

Δ

A FKI is the real estate derivative index value corresponding to a value change in commercial real estate in an individual market based on at least one of asking rent data and lease rent data including ending market pricing data and beginning market pricing data,

R1 is the ending market pricing data for a predetermined period,

R0 is the beginning market pricing data for the predetermined period, and

wherein the asking rent data and lease rent data are based on an evaluation of supply and demand pricing in the individual market; and

settling a trade of a financial instrument based on the real estate derivative index value.

2. The method of claim 1, wherein the trading instrument is a forward contract.

3. The method of claim 1, wherein the financial instrument is a futures contract.

4. The method of claim 1, wherein the financial instrument is an option contract.

5. The method of claim 1, wherein the trading instrument is a swap contract.

6. The method of claim 1, further comprising the steps of:

receiving a risk premium (Δ

RP);

receiving an inflation rate (Δ

CPI); and

generating a total market return based on the real estate derivative index value according to;

Total Market Return=Δ

RP+Δ

CPI+Δ

FKI; and

settling a trade of a financial instrument based on the total return.

7. The method of claim 6, wherein the risk premium is based on a change in a risk free rate.

8. The method of claim 7, wherein the risk free rate is an effective federal funds rate.

9. The method of claim 1, further comprising the steps of:

generating a total return for a plurality of individual markets by;

performing a weighted sum of the real estate derivative index value for each individual market of the plurality of individual markets, and

dividing the weighted sum by the number of the plurality of individual markets; and

settling a trade of a financial instrument based on the total return.

10. The method of claim 1, wherein the real estate derivative index value is a composite formed of data from a plurality of individual markets.

11. The method of claim 1, further comprising:

storing results from a plurality of trades settled by the settling.

12. A non-transitory computer-readable medium storing instructions for trading a real estate derivative index, which when executed by a computer cause the computer to perform:

receiving a real estate derivative index value, the real estate derivative index value generated according to;

Δ

FKI=(R1−

R0)/(R0)*100, wherein,

Δ

FKI is the real estate derivative index value corresponding to a value change in commercial real estate in an individual market based on at least one of asking rent data and lease rent data including ending market pricing data and beginning market pricing data,

R1 is the ending market pricing data for a predetermined period,

R0 is the beginning market pricing data for the predetermined period, and

wherein the asking rent data and lease rent data are based on an evaluation of supply and demand pricing in the individual market; and

settling a trade of a financial instrument based on the real estate derivative index value.

13. The non-transitory computer-readable medium according to claim 12, wherein the trading instrument is a forward contract.

14. The non-transitory computer-readable medium according to claim 12, wherein the financial instrument is a futures contract.

15. The non-transitory computer-readable medium according to claim 12, wherein the financial instrument is an option contract.

16. The non-transitory computer-readable medium according to claim 12, wherein the trading instrument is a swap contract.

17. The non-transitory computer-readable medium according to claim 12, further comprising the steps of:

receiving a risk premium (Δ

RP);

receiving an inflation rate (Δ

CPI); and

generating a total market return based on the real estate derivative index value according to;

Total Market Return=Δ

RP+Δ

CPI+Δ

FKI; and

settling a trade of a financial instrument based on the total return.

18. The non-transitory computer-readable medium according to claim 17, wherein the risk premium is based on a change in a risk free rate.

19. The non-transitory computer-readable medium according to claim 18, wherein the risk free rate is an effective federal funds rate.

20. The non-transitory computer-readable medium according to claim 12, further comprising the steps of:

generating a total return for a plurality of individual markets by;

performing a weighted sum of the real estate derivative index value for each individual market of the plurality of individual markets, and

dividing the weighted sum by the number of the plurality of individual markets; and

settling a trade of a financial instrument based on the total return.

21. The non-transitory computer-readable medium according to claim 12, wherein the real estate derivative index value is a composite formed of data from a plurality of individual markets.

22. The non-transitory computer-readable medium according to claim 12, further comprising:

storing results from a plurality of trades settled by said settling.

23. A system for trading a real estate derivative index, comprising:

a processor operable to;

receive a real estate derivative index value, the real estate derivative index value generated according to;

Δ

FKI=(R1−

R0)/(R0)*100, wherein,

Δ

FKI is the real estate derivative index value corresponding to a value change in commercial real estate in an individual market based on at least one of asking rent data and lease rent data including ending market pricing data and beginning market pricing data,

R1 is the ending market pricing data for a predetermined period,

R0 is the beginning market pricing data for the predetermined period, and

wherein the asking rent data and lease rent data are based on an evaluation of supply and demand pricing in the individual market; and

settle a trade of a financial instrument based on the real estate derivative index value.

24. The system according to claim 23, wherein the trading instrument is a forward contract.

25. The system according to claim 23, wherein the financial instrument is a futures contract.

26. The system according to claim 23, wherein the financial instrument an option contract.

27. The system according to claim 23, wherein the trading instrument is a swap contract.

28. The system according to claim 23, the processor further operable to:

receive a risk premium (Δ

RP);

receive an inflation rate (Δ

CPI); and

generate a total market return based on the real estate derivative index value according to;

Total Market Return=Δ

RP+Δ

CPI+Δ

FKI

settle a trade of a financial instrument based on the total return.

29. The method of claim 28, wherein the risk premium is based on a change in a risk free rate.

30. The method of claim 29, wherein the risk free rate is an effective federal funds rate.

31. The system according to claim 23, wherein the processor is further operable to:

generate a total return for a plurality of individual markets by;

performing a weighted sum of the real estate derivative index value for each individual market of the plurality of individual markets, and

dividing the weighted sum by the number of the plurality of individual markets; and

settle a trade of a financial instrument based on the total return.

32. The system according to claim 23, wherein the real estate derivative index value is a composite formed of data from a plurality of individual markets.

33. The system according to claim 23, further comprising:

a database operable to store results from a plurality of settled trades.