Derivative products
First Claim
1. A computer-implemented method of processing and clearing an agreement for a derivative product, comprising:
- a) receiving, at an electronic interface comprising at least one of an input device and a network interface, an initial performance bond of a protection buyer of the derivative product, wherein the derivative product has a digital outcome and comprises a predetermined number of constituents;
b) updating a price of the derivative product through a mark-to-market process using a processing unit in communication with the interface, including transferring at an interval a cash flow between the protection buyer and a protection seller based on the price of the derivative product;
c) adjusting the cash flow including a part of a total fee for the derivative product based on the price of the derivative product such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different;
d) for each of the predetermined number of constituents that experience a predetermined triggering event before an expiration date, requiring sufficient funds to cover a percentage of a final settlement price of the agreement; and
e) terminating the agreement.
1 Assignment
0 Petitions
Accused Products
Abstract
Methods, systems and apparatuses are described for processing and clearing derivatives products with a digital outcome and a plurality of constituents. A computer system configured to process and clear derivative products can accept initial and adjusted performance bonds from buyers and sellers, and adjust the market price of the derivative product at intervals. The market price may be adjusted on a mark-to-market basis and through analysis of other information, e.g., a change in credit rating of reference entities of the derivative product. As a result of price adjustments, cash flow may be generated between buyers and sellers (e.g., credit and debit to accounts). The derivative product may pay a percentage of a predetermined final settlement amount upon the triggering of a predetermined event in each of the constituents of the derivative product. However, upon expiration of the derivative product, the derivative'"'"'s market price is settled to zero and the agreement is terminated.
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Citations
25 Claims
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1. A computer-implemented method of processing and clearing an agreement for a derivative product, comprising:
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a) receiving, at an electronic interface comprising at least one of an input device and a network interface, an initial performance bond of a protection buyer of the derivative product, wherein the derivative product has a digital outcome and comprises a predetermined number of constituents; b) updating a price of the derivative product through a mark-to-market process using a processing unit in communication with the interface, including transferring at an interval a cash flow between the protection buyer and a protection seller based on the price of the derivative product; c) adjusting the cash flow including a part of a total fee for the derivative product based on the price of the derivative product such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different; d) for each of the predetermined number of constituents that experience a predetermined triggering event before an expiration date, requiring sufficient funds to cover a percentage of a final settlement price of the agreement; and e) terminating the agreement. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20)
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21. A non-transitory computer-readable medium containing computer-executable instructions for performing a method comprising:
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a) receiving an initial performance bond of a protection buyer of a derivative product, wherein the derivative product has a digital outcome and comprises a predetermined number of constituents; b) receiving an adjusted performance bond of a protection buyer of the derivative product; c) updating a price of the derivative product at an interval through a mark-to-market process; d) transferring a cash flow between the protection buyer and a protection seller based on the price of the derivative product; e) adjustinq the cash flow including a part of a total fee for the derivative product based on the price of the derivative product, such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different; f) for each of the predetermined number of constituents that experience a predetermined triggering event before an expiration date, requiring sufficient funds to cover a percentage of a final settlement price of the derivative product; and g) terminating the derivative product at the earlier of;
the expiration date, or an occurrence of the predetermined triggering event for all constituents in the derivative product. - View Dependent Claims (22)
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23. An apparatus for purchasing an exchange traded derivative product using a computer system, comprising:
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a processing unit; an interface comprising at least one of an input device, output device, and network interface; a memory unit storing computer-executable instructions configured to cause the processing unit to perform a method comprising; a) submitting, using the interface, an initial performance bond for the derivative product for receipt by a computer system that processes and clears an agreement for the derivative product, wherein the derivative product has a digital outcome and a price, and wherein the computer system updates the price of the derivative product at an interval through a mark-to-market process, including transferring a cash flow between a protection buyer of the derivative product and a protection seller of the derivative product based on the price of the derivative product, b) adjusting the cash flow including a part of a total fee for the derivative product based on the price of the derivative product such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different; c) if a predetermined triggering event occurs for any of the predetermined number of constituents before an expiration date, then requiring sufficient payment to cover an appropriate percentage of the final settlement price of the derivative product; and d) if no predetermined triggering event occurs before the expiration date, then terminating the agreement at a zero final settlement price. - View Dependent Claims (24, 25)
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Specification