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Derivative products

  • US 8,447,679 B2
  • Filed: 08/13/2012
  • Issued: 05/21/2013
  • Est. Priority Date: 09/29/2006
  • Status: Active Grant
First Claim
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1. An apparatus for trading an exchange traded derivative product using an exchange computer system, comprising:

  • a processing unit;

    an interface comprising at least one of an input device, output device, and network interface; and

    a memory unit storing computer-executable instructions, which when executed by the processing unit, cause the computer system to perform a method comprising;

    receiving an initial performance bond of a protection buyer of a derivative product, wherein the derivative product has a binary outcome;

    updating, by a processing unit of an exchange computer system, a price of the derivative product at an interval through a mark-to-market process using a computer, including transferring a cash flow between the protection buyer and the protection seller based on the price of the derivative product;

    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;

    determining, by the processing unit of the exchange computer system, the occurrence of a predetermined triggering event before an expiration date; and

    applying, by the processing unit of the exchange computer system, a final settlement price of the derivative product.

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