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System and method of margining fixed payoff products

  • US 8,538,852 B2
  • Filed: 11/16/2012
  • Issued: 09/17/2013
  • Est. Priority Date: 09/10/2004
  • Status: Active Grant
First Claim
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1. A computer implemented method of computing a margin requirement for a portfolio, the portfolio comprising at least one product having at least one associated fixed payoff value based on at least one outcome of a finite set of outcomes of an event, the method comprising:

  • determining, by a computer system comprising at least a computer processor, for each of the at least one product, an associated set of non-redundant outcomes of the finite set of outcome including the at least one outcome upon which the at least one associated fixed payoff value is based;

    generating, by the computer system, for each of the at least one product, a risk value for each outcome of the associated set of non-redundant outcomes, the risk value comprising one of a no change, gain or loss of a product value of the at least one product associated with the particular outcome;

    adjusting, by the computer system for each of the at least one product, each of the risk values based on a likelihood that the associated outcome will occur;

    determining, by the computer system, for each non-redundant outcome of the associated set of non-redundant outcomes, an aggregate risk value of each of the adjusted risk values generated for the particular outcome of each of the at least one product;

    determining, by the computer system, a maximum aggregate risk value comprising the aggregate risk value representing the largest loss from among the determined aggregate risk values; and

    computing, by the computer system, a margin requirement as a difference between a value of the portfolio and the maximum aggregate risk value.

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