Methods and apparatus relating to the formulation and trading of risk management contracts

Abstract

Methods and apparatus which deal with the management of risk relating to specified, yet unknown, future events are disclosed. ‘Sponsor’ stakeholders specify a particular product relating to an event or phenomenon for which there is a range of possible future outcomes. ‘Ordering’ stakeholders then offer contracts relating to the predetermined phenomenon and corresponding range of outcomes. The offered contracts specify an entitlement or (pay-oft) at the future time of maturity for “each outcome,” and a consideration (or premium) payable, in exchange, to a ‘counter-party’ stakeholder. Independently of the offered contracts, the ‘counter-party’ stakeholders input data as to their view of the likelihood of occurrence of each outcome in the predetermined range into the future, or specifically at the predetermined date of maturity. Each offered contract is priced by the processing units by calculating counter-party premiums from the registered data, and a match attempted by a comparison of the offered premium with the calculated premiums. Matched contracts can be further traded until maturity, and at-maturity processing handles the exchange of entitlement as between the matched parties to the contract.

1 . A data processing system to enable the formulation of multi-party risk management contracts, the system comprising:
 input means by which an ordering party can input contract data representing an offered contract for a predetermined phenomenon, the phenomenon having a future range of possible outcomes at a time of maturity, and said contract data specifying the same entitlement for each said outcome due to the ordering party and a consideration due to a counterparty, and at least one counterparty can input registering data for said predetermined phenomena; and   data processing means for pricing and matching contracts from said contract data and said registering data, said pricing including calculating a counter consideration from each said registering data, and said matching including comparing said consideration with each said counter consideration to match an offered contract with at least one of said counterparties.   
   
   
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