System and method for multi-factor modeling, analysis and margining of credit default swaps for risk offset
First Claim
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1. A method, comprising:
- receiving and storing, at a non-transitory computer readable medium, a plurality of data associated with a plurality of financial instruments within a portfolio;
calculating, using a processor communicatively coupled to the non-transitory computer readable medium, a maximum risk margin for each of a plurality of risk factors, wherein the maximum risk margin for each of the plurality of risk factors is determined based on the plurality of data, wherein the plurality of risk factors include a convergence and divergence risk factor, and wherein the calculation of the maximum risk margin includes;
classifying the plurality of financial instruments within the portfolio according to tenor;
calculating a periodic change in spreads for each tenor;
identifying a largest periodic change in spreads; and
calculating the convergence and divergence risk factor based on the largest periodic change in spreads; and
calculating, using the processor, a total multi-factor risk margin based on the maximum risk margin for each of the plurality of risk factors.
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Abstract
A method for determining a margin requirement associated with a plurality of financial instruments within a portfolio is disclosed. The method includes receiving a plurality of data associated with the plurality of financial instruments within the portfolio, calculating a maximum risk margin for each of the plurality of risk factors such that the maximum risk margin for each of the plurality of risk factors is determined based on the plurality of data, and calculating a total multi-factor risk margin based on maximum risk margin for each of the plurality of risk factors.
61 Citations
18 Claims
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1. A method, comprising:
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receiving and storing, at a non-transitory computer readable medium, a plurality of data associated with a plurality of financial instruments within a portfolio; calculating, using a processor communicatively coupled to the non-transitory computer readable medium, a maximum risk margin for each of a plurality of risk factors, wherein the maximum risk margin for each of the plurality of risk factors is determined based on the plurality of data, wherein the plurality of risk factors include a convergence and divergence risk factor, and wherein the calculation of the maximum risk margin includes; classifying the plurality of financial instruments within the portfolio according to tenor; calculating a periodic change in spreads for each tenor; identifying a largest periodic change in spreads; and calculating the convergence and divergence risk factor based on the largest periodic change in spreads; and calculating, using the processor, a total multi-factor risk margin based on the maximum risk margin for each of the plurality of risk factors. - View Dependent Claims (2, 3, 4, 5, 6, 7)
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8. A method, comprising:
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receiving and storing, at a non-transitory computer readable medium, a plurality of data associated with a plurality of credit default swaps within a portfolio; calculating, using a processor communicatively coupled to the non-transitory computer readable medium, a plurality of maximum risk margins based on at least a portion of the received plurality of data, wherein the plurality of maximum risk margins include a convergence and divergence risk margin, and wherein the calculation of the plurality of maximum risk margins comprises; classifying the plurality of data according to tenor; calculating a periodic change in spreads for each tenor; identifying a largest periodic change in spreads; calculating the convergence and divergence risk factor based on the largest periodic change in spreads; calculating, using the processor, a total multi-factor risk margin based on the plurality of maximum risk margins; and sending data indicative of the total multi-factor risk margin to a device. - View Dependent Claims (9, 10, 11)
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12. An apparatus, comprising:
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a non-transitory computer readable medium configured to store a plurality of data associated with a plurality of financial instruments within a portfolio; a margin processor, communicatively coupled to the non-transitory computer readable medium, configured to; calculate a maximum risk margin for each of a plurality of risk factors, wherein the maximum risk margin for each of the plurality of risk factors is determined based on the plurality of data; and calculate a total multi-factor risk margin based on the maximum risk margin for each of the plurality of risk factors; and a convergence and divergence risk processor, communicatively coupled to the non-transitory computer readable medium, configured to; classify the plurality of financial instruments within the portfolio according to tenor; calculate a periodic change in spreads for each tenor; identify a largest periodic change in spreads; and calculate a convergence and divergence risk factor based on the largest periodic change in spreads, wherein the plurality of risk factors includes the convergence and divergence risk factor. - View Dependent Claims (13, 14, 15, 16, 17, 18)
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Specification