System and method for generating risk management curves

• US 7,890,343 B1
• Filed: 01/11/2005
• Issued: 02/15/2011
• Est. Priority Date: 01/11/2005
• Status: Active Grant

• Current Assignee: JP Morgan Chase Bank, N.A. (JP Morgan Chase & Co)
• Original Assignee: JP Morgan Chase Bank, N.A. (JP Morgan Chase & Co)
• Inventors: Jung, Philip H., Simon, Doron, Chandarana, Samik, Michelson, Gary, Iasello, Anthony, Bhatia, Kapil, Bennett, Stephen Wayne, Zhang, Chet, Machado, Robert P. Jr., Smith, Mitchell, Coolen, Paul
• Primary Examiner(s): O'Connor; Gerald J.
• Assistant Examiner(s): NGUYEN, HIEP VAN
• Application Number:
  US11/033,081
• Time in Patent Office: 2,226 Days
• Field of Search: 705/35, 705/36, 705/37, 705/38, 705 2- 4
• US Class Current: 705/2
• 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 40/08 Insurance

Abstract

Accurate risk management curves are generated for companies that have limited market information available to generate a risk management curve purely from the market information by allowing a pre-existing risk management curve (referred to as a “leader curve”) to be selected as a basis for generating a new risk management curve (referred to as a “target curve”). The leader curve may pertain to a company (referred to as the “leader company”) that has similar characteristics to the company for which the target curve is being generated (referred to as the “target company”). Further, any known differences between the leader company and the target company may be reflected in the target curve by incorporating any number of offsets between the leader curve and the target curve.

Claims

1. A method for generating a target financial risk management curve, using a computer, the method comprising the steps of:

selecting a pre-existing financial risk management curve as a leader curve of a first company using the computer, the leader curve including a plurality of points;

selecting at least one technique using at least a parameter required for generating the target financial risk management curve using the computer;

specifying an offset based on said selected technique for each of the plurality of points in the leader curve independently of other points of the plurality of points in the leader curve using the computer, said offset quantifying differences between the leader curve and the target financial risk management curve, wherein said target financial risk management curve includes a plurality of points offset from the leader curve by the offsets specified for the plurality of points in the leader curve; and

modifying said leader curve to generate the target financial risk management curve for a second company using the computer;

wherein said second company has insufficient market information available to generate a target financial risk management curve based on said second company'"'"'s market information, and said second company has similar characteristics to said first company.

2. The method of claim 1, further comprising the step of updating the target financial risk management curve to reflect a change in the leader curve.

3. The method of claim 1, further comprising the step of storing the target financial risk management curve in a data storage system.

4. The method of claim 3, wherein the leader curve is selected from the data storage system.

5. The method of claim 1, wherein the offsets quantify known differences between the leader company and the target company.

6. The method of claim 1, wherein the leader curve is associated with a first financial instrument and the target financial risk management curve is associated with a second financial instrument that is different from the first financial instrument.

7. The method of claim 1, wherein the target financial risk management curve is a Credit Default Swap (“

CDS”

) curve, a dimension of the target financial risk management curve specifies a market value of a CDS, and a dimension of the target financial risk management curve specifies a tenor.

8. The method of claim 1, wherein the target financial risk management curve is a portfolio credit derivatives curve, a collateralized asset swap curve, a credit swap option curve, a credit default swap curve, a credit downgrade curve, a credit linked notes curve, an asset backed securities curve, a wrapped asset backed securities curve, a collateralized notes curve, a collateralized loans curve, a super senior curve, an equity default swap curve, an equity stability swap curve, an equity bill swap curve, or a bond curve.

9. The method of claim 1, wherein a dimension of the target financial risk management curve specifies a market value, and the market value does not fall below a predetermined value.

10. A method for generating a target financial risk management curve using a computer, the method comprising the steps of:

selecting a pre-existing financial risk management curve as a leader curve for a first company using the computer;

selecting based on at least one parameter an offsetting financial risk management curve using the computer, wherein said offsetting financial risk management curve specifies an offset quantifying differences between the leader curve and the target financial risk management curve; and

generating a target financial risk management curve for a second company by modifying the leader curve based upon the offsetting financial risk management curve using the computer, wherein said second company has insufficient market information available to generate a target financial risk management curve based on said second company'"'"'s market information, and said second company has similar characteristics to said first company.

11. The method of claim 10, wherein the step of generating the target financial risk management curve adds or subtracts the offsetting financial risk management curve to/from the leader curve.

12. The method of claim 10, further comprising the step of updating the target financial risk management curve to reflect a change in the leader curve.

13. The method of claim 10, further comprising the step of updating the target financial risk management curve to reflect a change in the offsetting curve.

14. The method of claim 10, further comprising the step of storing the target financial risk management curve in a data storage system.

15. The method of claim 14, wherein at least one of the leader curve and the offsetting curve is selected from the data storage system.

16. The method of claim 10, wherein the target financial risk management curve is a Credit Default Swap (“

CDS”

) curve, a dimension of the target financial risk management curve specifies a market value of a CDS, and a dimension of the target financial risk management curve specifies a tenor.

17. The method of claim 10, wherein the target financial risk management curve is a portfolio credit derivatives curve, a collateralized asset swap curve, a credit swap option curve, a credit default swap curve, a credit downgrade curve, a credit linked notes curve, an asset backed securities curve, a wrapped asset backed securities curve, a collateralized notes curve, a collateralized loans curve, a super senior curve, an equity default swap curve, an equity stability swap curve, an equity bill swap curve, or a bond curve.

18. The method of claim 10, wherein a dimension of the target financial risk management curve specifies a market value, and the market value does not fall below a predetermined value.