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Financial activity based on natural peril events

  • US 8,266,042 B2
  • Filed: 08/06/2008
  • Issued: 09/11/2012
  • Est. Priority Date: 12/21/2004
  • Status: Active Grant
First Claim
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1. A computer implemented method for automatically setting prices of financial products in a financial activity having a plurality of possible outcomes, comprising the steps of:

  • receiving a first request from a first participant terminal of a plurality of participant terminals to purchase a financial product for one outcome of the possible outcomes, i; and

    electronically computing a price for the financial product, in response to the first request, based at least in part on the following first formula;


    Pit=Kπ

    it=K[π

    it−

    1


    tπ

    it−

    1
    (1−

    π

    it−

    1
    )]wherei designates the one outcome requested by the first participant,t is a time index counter designating the current purchase requested by the first participant,t−

    1 is a time index counter designating a last previous transaction purchase,Pit is the price for the financial product,K=c exp[rj/365],c is a money amount used as a scaling constant,r is a constant proportional to a short term annualized interest rate,j is a number of days since the financial activity was started,π

    it is the current pricing probability for outcome i,π

    it−

    1
    is the last previously computed pricing probability for outcome i,α

    t is a price adjustment parameter, having a value greater than 0 and less than 0.1, anddelivering the price for the financial product of the first request to the first participant terminal.

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