UPSIDE FORWARD WITH EARLY FUNDING PROVISION
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 dependant 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; and
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.
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Abstract
A system for and method of providing a forward contract with an upside return and the possibility of early valuation are presented. The prices of the underlying financial instruments are allowed to float to a limited extent. Moreover, the party taking the short position is allowed to cash out early, without having to unwind the entire contract. The contact may be used, for example, by a corporation that wishes to raise capital using equity instruments.
100 Citations
19 Claims
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1. A method comprising:
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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 dependant 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; and 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. - View Dependent Claims (2, 3, 4, 5, 6)
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7. A method comprising:
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contracting for sale of a first quantity of financial instruments on a maturity date in exchange for a price, at least one of the price and the first quantity reflecting a predetermined floor price and being at least partially dependant on a market price of the first quantity of financial instruments at a delivery date, the delivery being to an entity; offering to the entity, in accordance with the step of contracting, a second quantity of the financial instruments at a time prior to the maturity date for a value, the value reflecting a present value of the predetermined floor price calculated at a time prior to the delivery date, wherein the second quantity is less than the first quantity; calculating, using a programmed computer, a maturity settlement, the step of calculating comprising accounting for the first quantity of financial instruments and accounting for the second quantity of financial instruments; and receiving the maturity settlement from the entity. - View Dependent Claims (8, 9, 10, 11, 12)
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13. A method comprising:
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contracting with an entity to purchase a first quantity of financial instruments on a 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 dependant 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; and receiving an offer to buy, in accordance with the contracting step, a second quantity of the financial instruments from the entity at a time prior to the predetermined future date for a value, the value reflecting a present value of the predetermined floor price calculated at a time prior to the delivery date, wherein the second quantity is less than the first quantity. - View Dependent Claims (14, 15, 16, 17, 18, 19)
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Specification