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Upside forward with early funding provision

  • US 8,463,687 B2
  • Filed: 08/27/2010
  • Issued: 06/11/2013
  • Est. Priority Date: 10/11/2005
  • Status: Active Grant
First Claim
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1. A method comprising:

  • contracting with an entity to purchase a first quantity of financial instruments on at least one predetermined future date for a price, at least one of the price and the first quantity reflecting a predetermined floor price and being at least partially dependent on a market price of the first quantity of financial instruments at a delivery date;

    hedging a position, using a programmed computer, the position defined at least partially by the contracting step;

    buying, in accordance with the contracting step and for a present value of the predetermined floor price of the second quantity of financial instruments calculated at a time prior to the delivery date, a second quantity of the financial instruments from the entity at a time prior to the predetermined future date, wherein the second quantity is less than the first quantity; and

    paying compensation, the compensation comprising a difference between a ceiling price and the floor price for the second quantity of financial instruments if a market price of the second quantity of financial instruments at the maturity date is greater than the ceiling price, zero if the market price of the second quantity of financial instruments at the maturity date is less than the floor price, and a difference between the market price of the second quantity of financial instruments at the maturity date and the floor price for the second quantity of financial instruments if the market price of the second quantity of financial instruments at the maturity date lies between the ceiling price and the floor price for the second quantity of financial instruments.

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