Method and system for creating a volatility benchmark index
First Claim
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1. A system having a processor for creating and trading derivative investment instruments based on a volatility benchmark index, comprising:
- a volatility benchmark index module in communication with the processor configured to calculate a volatility benchmark index value for a desired group of underlying assets;
a dissemination module in communication with the volatility benchmark index module, the dissemination module configured to disseminate the calculated volatility benchmark index value over a communications network to at least one market participant; and
a trading module in communication with the dissemination module, the trading module configured to receive order information via the communications network,wherein the processor is configured to calculate the volatility benchmark index value according to the formula;
VPDt=Nt=(1+rt-1)VPDt-1−
MultNlast(Ft−
Ft-1)where VPDt is a VIX premium index value at date t, Mt is a Treasury bill balance on date t, rt-1 is an effective Treasury bill rate from date t−
1 to date t, Nlast is a number of futures sold at a last roll date, Ft is a daily settlement price of futures at date t, and Mult is a multiplier of the futures.
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Abstract
A method and system for creating a volatility benchmark index is disclosed. The method includes obtaining a value of a Treasury bill account less a mark-to-market value of at least one of a volatility-based future or option and calculating a value reflecting a volatility benchmark. The value may be displayed at a trading facility and volatility benchmark quotes may be transmitted by the trading facility to a market participant.
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Citations
7 Claims
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1. A system having a processor for creating and trading derivative investment instruments based on a volatility benchmark index, comprising:
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a volatility benchmark index module in communication with the processor configured to calculate a volatility benchmark index value for a desired group of underlying assets; a dissemination module in communication with the volatility benchmark index module, the dissemination module configured to disseminate the calculated volatility benchmark index value over a communications network to at least one market participant; and a trading module in communication with the dissemination module, the trading module configured to receive order information via the communications network, wherein the processor is configured to calculate the volatility benchmark index value according to the formula;
VPDt=Nt=(1+rt-1)VPDt-1−
MultNlast(Ft−
Ft-1)where VPDt is a VIX premium index value at date t, Mt is a Treasury bill balance on date t, rt-1 is an effective Treasury bill rate from date t−
1 to date t, Nlast is a number of futures sold at a last roll date, Ft is a daily settlement price of futures at date t, and Mult is a multiplier of the futures.- View Dependent Claims (2, 3, 4)
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5. A system having a processor for creating and trading derivative investment instruments based on a volatility benchmark index, comprising:
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a volatility benchmark index module in communication with the processor configured to calculate a volatility benchmark index value for a desired group of underlying assets; a dissemination module in communication with the volatility benchmark index module, the dissemination module configured to disseminate the calculated volatility benchmark index value over a communications network to at least one market participant; and a trading module in communication with the dissemination module, the trading module configured to receive order information via the communications network, wherein on a roll date the processor is configured to calculate VPDt according to the formula;
VPDt=(1+rt-1)VPDt-1−
Mult(Nlast(SOQt−
Ft-1)−
Nnew(Ft−
Fbid))where SOQt is a final settlement price of expiring futures, Nnew is a number of new futures and Fobid is an opening bid price of volatility-based futures.
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6. A system having a processor for creating and trading derivative investment instruments based on a volatility benchmark index, comprising:
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a volatility benchmark index module in communication with the processor configured to calculate a volatility benchmark index value for a desired group of underlying assets; a dissemination module in communication with the volatility benchmark index module, the dissemination module configured to disseminate the calculated volatility benchmark index value over a communications network to at least one market participant; and a trading module in communication with the dissemination module, the trading module configured to receive order information via the communications network, wherein the processor is configured to calculate the volatility benchmark index value according to the formula;
VPNt=Mt+100*10NlastCtwhere Mt is a Treasury bill balance at a close of date t, Nlast is a number of futures sold and 10 Nlast is a number of volatility index (VIX) options bought at a last roll date, and Ct is an average of bid and ask quotes of VIX calls at a close on date t. - View Dependent Claims (7)
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Specification