System and method for efficiently using collateral for risk offset
First Claim
1. A method for computing an adjustment to a margin requirement for a portfolio of a plurality of products traded on an exchange, the method comprising:
- calculating, using a computer processor, the margin requirement for the plurality of products;
identifying, using the computer processor, a collateral as satisfying at least a portion of the margin requirement;
analyzing, using the computer processor, at least one factor indicative of a relationship between the collateral and one or more of the plurality of products, wherein the at least one factor describes a degree of correlation between the collateral and the one or more of the plurality of products; and
computing, using the computer processor, an adjustment to the margin requirement based on the factor indicative of the relationship between the collateral and the one or more of the plurality of products, wherein the adjustment to the margin requirement is a reduction of the margin requirement that increases as the degree of correlation increases.
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Abstract
A system and method for analyzing correlation between the assets given by the trader for collateral and that trader'"'"'s open positions is disclosed. Thus, if the collateral is correlated to the trader'"'"'s open positions, then some offset can be given. If there is no correlation then the collateral is valued in the conventional way. For example, if a trader provides t-bills as collateral for an account that has open positions (e.g. short futures) in T-bills, then that trader'"'"'s account can be credited with some offset since the value of T-bills and T-bill futures are highly correlated.
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Citations
18 Claims
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1. A method for computing an adjustment to a margin requirement for a portfolio of a plurality of products traded on an exchange, the method comprising:
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calculating, using a computer processor, the margin requirement for the plurality of products; identifying, using the computer processor, a collateral as satisfying at least a portion of the margin requirement; analyzing, using the computer processor, at least one factor indicative of a relationship between the collateral and one or more of the plurality of products, wherein the at least one factor describes a degree of correlation between the collateral and the one or more of the plurality of products; and computing, using the computer processor, an adjustment to the margin requirement based on the factor indicative of the relationship between the collateral and the one or more of the plurality of products, wherein the adjustment to the margin requirement is a reduction of the margin requirement that increases as the degree of correlation increases. - View Dependent Claims (2, 3, 4, 5, 6, 7)
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8. A margin requirement calculator, the calculator comprising:
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a memory storing a listing of a portfolio of a plurality of products traded on an exchange and storing a margin requirement for the portfolio of the plurality of products; and a computer processor coupled with the memory and programmed to; identify a collateral as satisfying at least a portion of the margin requirement; analyze at least one factor indicative of a relationship between the collateral and one or more of the plurality of products, wherein the at least one factor describes a degree of correlation and the adjustment to the margin requirement is a reduction of the margin requirement; and compute an adjustment to the margin requirement based on the factor indicative of the relationship between the collateral and the one or more of the plurality of products wherein the adjustment to the margin requirement is a reduction of the margin requirement that increases as the degree of correlation increases. - View Dependent Claims (9, 10, 11, 12, 13, 14)
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15. A non-transitory computer readable medium storing instructions, which when executed by a computer processor perform a method for computing an adjustment to a margin requirement for a portfolio of a plurality of products traded on an exchange, the method comprising:
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calculating, using a computer processor, the margin requirement for the plurality of products; identifying, using the computer processor, a collateral as at least a portion of the margin requirement; analyzing, using the computer processor, at least one factor indicative of a relationship between the collateral and one or more of the plurality of products, wherein the at least one factor describes a degree of correlation; and computing, using the computer processor an adjustment to the margin requirement based on the factor between the collateral and the one or more of the plurality of products wherein the higher the degree of correlation, the lower the margin requirement is adjusted. - View Dependent Claims (16, 17, 18)
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Specification