Fair-value pricing of a financial asset

• US 7,167,837 B1
• Filed: 04/16/2001
• Issued: 01/23/2007
• Est. Priority Date: 04/16/2001
• Status: Expired due to Term

• Current Assignee: ICE Data Services, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Interactive Data Pricing & Reference Data LLC (Intercontinental Exchange, Inc.)
• Inventors: Zitzewitz, Eric, Ciampi, Peter L.
• Primary Examiner(s): Millin; Vincent
• Assistant Examiner(s): FELTEN, DANIEL S
• Application Number:
  US09/835,605
• Time in Patent Office: 2,108 Days
• Field of Search: 705/36, 705/35, 705/37, 705/38
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

The fair value of a fund is determined by analyzing various factors indicative of how each underlying asset of the fund would be valued on the open market. The fund may be an international mutual fund that includes underlying assets, which include international equities. Because some of the underlying assets may not be traded in a liquid market at the time of valuation of the fund, a reliable estimate of the value of such underlying assets must be made based on available data related through historical correlations. The fair value of the fund is determined based on the estimated or actual values of each of the underlying assets.

Claims

1. A computerized method for determining at an effective valuation time a fair value of a first security listed on a securities market that is closed, comprising:

electronically receiving historical price data, wherein said historical price data comprises data for a plurality of price-related time-dependent variables;

electronically performing a multivariate regression analysis on said historical price data; and

electronically calculating at said effective valuation time a fair value of said first security based on said multivariate regression analysis and on values of at least two of said plurality of price-related time-dependent variables.

2. A method as in claim 1, wherein said first security is assigned to a portfolio of securities, a second security is assigned to said portfolio of securities, and said second security is traded in a liquid market at said effective valuation time, further comprising assigning a fair value to said second security at said effective valuation time based on a recent trading price of said second security.

3. A method as in claim 1, wherein said multivariate regression analysis comprises an in-sample step-wise regression.

4. A method as in claim 1, wherein said step of electronically calculating a fair value comprises calculating a function of a recent closing price of said first security and a recent depositary receipt price for said first security.

5. A method as in claim 1, wherein said step of electronically calculating a fair value comprises calculating a function of a most recent closing price of said first security and a second most recent closing price of said first security.

6. A method as in claim 1, wherein said step of electronically calculating a fair value comprises calculating a rate of change of a securities market futures index price.

7. A method as in claim 1, wherein said step of electronically calculating a fair value comprises calculating a rate of change of a sector index price.

8. A method as in claim 1, wherein said step of electronically calculating a fair value comprises selecting a subset of two or more variables from said plurality of variables, wherein said two or more variables have recently proven reliable in predicting an opening price for said first security.

9. A method as in claim 1, wherein said historical data comprises time-dependent data regarding at least one currency exchange rate, wherein said currency exchange rate is for exchanging U.S. currency with currency for a country with a securities exchange on which said first security is traded and that has closed.

10. A method as in claim 9, wherein said time-dependent data regarding at least one currency exchange rate comprises data regarding an exchange rate at a most recent local closing time for said first security.

11. A method as in claim 1, further comprising electronically receiving a request for a fair price for said first security.

12. A method as in claim 1, wherein said historical data comprises time-dependent data regarding a local opening price for said first security.

13. A method as in claim 2, wherein said portfolio of securities is held by said mutual fund, and further comprising calculating a fair value of said mutual fund at said effective valuation time based in part on fair values calculated for said first and second assets.

15. A method as in claim 1, wherein said step of electronically calculating a fair value comprises calculating a change in a securities market futures index price.

14. A computerized method for determining a fair value of a security traded on a securities market that is open part of the time and closed part of the time, at an effective valuation time when said security is not actively traded on said market, comprising:

electronically receiving prices of said security during a plurality of periods when said market was open;

electronically receiving historical market data for a plurality of financial asset market based time-dependent variables other than prices for said first security;

electronically performing a multivariate regression analysis on said historical market data and said prices of said security during a plurality of periods when said market was open; and

electronically calculating a fair value of said first security at said valuation time based on said multivariate regression and on a price for said security during a period when said market was last open.

16. A method for determining at an effective valuation time fair values of securities held in a portfolio of securities, said portfolio comprising securities in a first group and securities in a second group, wherein each security in said first group is a security that is not being actively traded on a securities market at said effective valuation time, and wherein each security in said second group is a second security that is being actively traded on said securities market at said effective valuation time, said method comprising:

for each security in said first group, calculating a fair value of that security at said effective valuation time using the method of claim 14, and;

for each security in said second group, setting a fair value of that security at said effective valuation time to be equal to a market value of that security on said market.