System and method for flexible spread participation

• US 8,442,896 B2
• Filed: 08/21/2012
• Issued: 05/14/2013
• Est. Priority Date: 09/10/2004
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Glinberg, Dmitriy, Yoo, Tae S., Michaels, Dale, Gogol, Edward M.
• Primary Examiner(s): Hammond, III, Thomas M
• Application Number:
  US13/590,505
• Publication Number:
  US 20120317055A1
• Time in Patent Office: 266 Days
• Field of Search: 705/36.R
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system and method for risk analysis of a portfolio of derivative products is disclosed which is conducted based on a set of flexible rules. The system and method allow creating predefined sets of products for the purpose of future risk offsets. If a futures trade as a subset of that set of products that met a threshold level, then the subset is assigned the offset value (or a pro rata or other portion of the offset value) of the predefined set. For example, assume that the predefined set consists of one S&P 500 futures, one NASDAQ futures, one S&P Midcap 400 futures and one Russell 1000 futures and the threshold is three. If the futures trader holds any three of those four futures, the three futures can be grouped, assigned an offset value, and this group can be used as one asset for purpose of further risk offsets.

Claims

1. A computer implemented method of minimizing computations required to compute a margin requirement for a portfolio comprising positions on a plurality of products traded on an exchange, the method comprising:

creating, by a computer processor, one or more predefined sets of products traded on the exchange, each of the one or more predefined sets being associated with an offset value;

determining, by the computer processor, whether the portfolio includes one or more position on any of the products of any one of the one or more predefined sets;

wherein, for each of the one or more positions on products included in the portfolio determined to be in one of the one or more predefined sets, assigning the determined one or more positions an offset value based at least on a portion of the associated offset value;

computing, by the computer processor, a risk offset for each of the positions on products included in the portfolio which are determined not to be in one of the predefined sets; and

computing, by the computer processor, a risk offset for the portfolio based on the assigned offset values and the computed risk offsets.

2. The computer implemented method of claim 1, wherein the determining further comprises determining whether the portfolio includes one or more position on at least a minimum number of the products of any one of the one or more predefined sets, wherein the portfolio is determined not to include any positions on any of the products in a particular predefined set if the portfolio includes less than the minimum number of positions on the products in the particular predefined set.

3. The computer implemented method of claim 2 wherein the minimum number of products for one of the predefined sets is different from the minimum number of products for another of the predefined sets.

4. The computer implemented method of claim 1 wherein the assigned offset value is based on the number of products in the associated predefined set for which positions are included in the portfolio.

5. The computer implemented method of claim 1 wherein the assigned offset value comprises the entire associated offset value of the predefined set.

6. The computer implemented method of claim 1, wherein the products comprise conventional futures contracts.

7. The computer implemented method of claim 1, where in the products comprise over the counter products.

8. The computer implemented method of claim 1 wherein the number of assigned offset values and computed risk offsets is less than the number of positions included in the portfolio.

9. The computer implemented method of claim 1 wherein the associated offset values for each of the one or more predefined sets are pre-computed prior to creation of the positions included in the portfolio.

20. The computer implemented method of claim 1, wherein the determining further comprises determining whether the portfolio includes one or more position on at least a minimum number of the products of the at least one predefined set, wherein the portfolio is determined not to include any positions on any of the products in the at least one predefined set if the portfolio includes less than the minimum number of positions on the products in the at least one predefined set.

10. A system for minimizing computations required to compute a margin requirement for a portfolio comprising positions on a plurality of products traded on an exchange, the system comprising:

one or more predefined sets of products traded on the exchange stored in a memory, each of the one or more predefined sets being associated in the memory with an offset value;

a risk processor coupled with the memory so as to access the one or more predefined sets and operative to execute a computer program stored in the memory, the computer program being operative to cause the risk processor to determine whether the portfolio includes one or more position on any of the products of any one of the one or more predefined sets, and wherein, for each of the one or more positions on products included in the portfolio determined to be in one of the one or more predefined sets, assign the determined one or more positions an offset value based at least on a portion of the associated offset value; and

wherein execution of the computer program is further operative to cause the risk processor to compute a risk offset for each of the positions on products included in the portfolio which are determined not to be in one of the predefined sets, and compute a risk offset for the portfolio based on the assigned offset values and the computed risk offsets.

11. The system of claim 10, wherein the computer program is further operative to cause the risk processor to determine whether the portfolio includes one or more position on at least a minimum number of the products of any one of the one or more predefined sets, wherein the portfolio is determined not to include any positions on any of the products in a particular predefined set if the portfolio includes less than the minimum number of positions on the products in the particular predefined set.

12. The system of claim 11 wherein the minimum number of products for one of the predefined sets is different from the minimum number of products for another of the predefined sets.

13. The system of claim 10 wherein the assigned offset value is based on the number of products in the associated predefined set for which positions are included in the portfolio.

14. The system of claim 10 wherein the assigned offset value comprises the entire associated offset value of the predefined set.

15. The system of claim 10, wherein the products comprise conventional futures contracts.

16. The system of claim 10, where in the products comprise over the counter products.

17. The system of claim 10 wherein the number of assigned offset values and computed risk offsets is less than the number of positions included in the portfolio.

18. The system of claim 10 wherein the associated offset values for each of the one or more predefined sets are pre-computed prior to creation of the positions included in the portfolio.

19. A computer implemented method of minimizing computations required to compute a margin requirement for a portfolio comprising positions on a plurality of products traded on an exchange, the method comprising:

creating, by a computer processor, at least one predefined set of products traded on the exchange, the at least one predefined set being associated with an offset value;

determining, by the computer processor, whether the portfolio includes one or more position on any of the products of the at least one predefined set;

wherein, for each of the one or more positions on products included in the portfolio determined to be in the at least one predefined set, assigning the determined one or more positions an offset value based at least on a portion of the associated offset value;

computing, by the computer processor, a risk offset for each of the positions on products included in the portfolio which are determined not to be in one of the predefined sets; and

computing, by the computer processor, a risk offset for the portfolio based on the assigned offset values and the computed risk offsets, wherein the number of assigned offset values and computed risk offsets is less than the number of positions included in the portfolio.