Derivative products
First Claim
1. A computer-implemented method of processing and clearing an agreement for a derivative, 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 a derivative product, wherein the derivative product has a binary outcome;
b) receiving at the interface a second initial performance bond of a protection seller of the derivative product;
c) updating a price of the derivative product at an interval through a mark-to-market process using a processing unit in communication with the interface, including transferring a cash flow between the protection buyer and the protection seller based on the price of the derivative product;
d) adjusting the cash flow including a part of a total fixed 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; and
e) if a predetermined triggering event occurs before an expiration date, then requiring sufficient funds to cover a final settlement price of the agreement and terminating the agreement.
1 Assignment
0 Petitions
Accused Products
Abstract
Systems and methods are described for processing and clearing derivatives products with a binary outcome and having a final settlement based on a triggering event. 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., the credit rating of a reference entity. As a result of price adjustments, cash flow may be generated between buyers and sellers. The derivative product may pay a predetermined final settlement amount or percentage upon the triggering of a predetermined event. 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
23 Claims
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1. A computer-implemented method of processing and clearing an agreement for a derivative, 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 a derivative product, wherein the derivative product has a binary outcome; b) receiving at the interface a second initial performance bond of a protection seller of the derivative product; c) updating a price of the derivative product at an interval through a mark-to-market process using a processing unit in communication with the interface, including transferring a cash flow between the protection buyer and the protection seller based on the price of the derivative product; d) adjusting the cash flow including a part of a total fixed 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; and e) if a predetermined triggering event occurs before an expiration date, then requiring sufficient funds to cover a final settlement price of the agreement and terminating the agreement. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18)
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19. 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 binary outcome; 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) adjusting the cash flow including a part of a total fixed 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) if a predetermined triggering event occurs before an expiration date, then requiring sufficient funds to cover a final settlement price of the agreement and terminating the agreement; and g) terminating the agreement upon the expiration date before a predetermined triggering event occurs. - View Dependent Claims (20)
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21. 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 binary 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 fixed 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 before an expiration date, then requiring sufficient payment to cover 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 (22, 23)
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Specification