Apparatuses and processes for calculating options

Abstract

The present invention introduces an apparatus and process which may be implemented on a vast variety of computer systems. The apparatus and process of the present invention use a computer system to receive and store data representative of a particular asset, a type of option (call or put), requested exercise price and a multitude of other variables related to the asset. The apparatus and process then generate data representative of an option premium. The data representative of the option may then be used for transacting an option, as the basis for determining a correlated expiring option premium, or to determine the premium of an asset relatable to a corresponding option. Other embodiments are also claimed and described.

1 . An apparatus for transacting an expirationless option contract comprising:
 an interface for receiving data representative of an option on an asset, wherein the data includes the value of the underlying asset;   a storage medium in communication with the interface to store the data received by the interface and an option pricing algorithm; and   a processor in communication with the storage medium configured to compute an option premium on an expirationless option contract using the value of an underlying asset of the option and an option pricing algorithm, wherein the option contract grants the owner of the option contract a right to sell or buy the underlying asset at a predetermined price.   
   
   
       2 . The apparatus of  claim 1  wherein the data representative of an option on an asset further includes data selected from the group consisting of an option type, an exercise price for the particular asset, the historic price volatility of the particular asset and the margin requirement for the particular asset and combinations thereof. 
   
   
       3 . The apparatus of  claim 1  wherein the asset is a security. 
   
   
       4 . The apparatus of  claim 3  wherein the data representative of an option on an asset further includes data selected from the group consisting of the current market price for the security, an exercise price for the security, the margin price for the security and combinations thereof. 
   
   
       5 . The apparatus of  claim 1  wherein the interface is configured to receive a signal representative of a request to transact an option on an asset. 
   
   
       6 . The apparatus of  claim 1  wherein the option pricing algorithm is selected from the group consisting of the Black-Scholes, the Binomial Pricing, the Finite Difference and the Analytic Approximation algorithms. 
   
   
       7 . The apparatus of  claim 1  wherein said asset is an option selected from the group consisting of: vanilla options; Asian options; barrier options; binary options; chooser options; compound options; crack/spread options; currency translated options; jump options; lookback options; rainbow options; options on U.S. or foreign “stripped” government securities divided into two or more instruments of principal and interest or price and dividend; options on stripped corporate, agency, and municipal securities, notes, bills and certificates of deposit; options on callables; and options on odd-first, -last, -middle, or securities with varying coupon/dividend periods. 
   
   
       8 . The apparatus of  claim 1  wherein said asset is selected from the group consisting of: equity, bonds, loans, private placements, forward contracts, futures contracts, swaps, forward swaps/delayed start swaps, break forwards, straddles/strangles/butterflies, reverse floating rate loan/bull floating rate notes, dual currency bonds, callable/puttable bonds, puttable stock, bond with warrant, convertible bonds, liquid yield option notes, commodity-linked bonds, auction rate notes/debentures, collaterallized mortgage obligations/real estate mortgage investment conduits, commercial real-estate backed bonds, credit enhanced debt securities, dollar bills, foreign exchange paper, floating/bate sensitive notes, floating rate tax-exempt revenue bonds, increasing rate notes, indexed currency option notes or principal exchange rate linked securities, caps/floors/collars, interest rate reset notes, mortgage pass-through certificates, negotiable certificates of deposit, adjustable tender securities, puttable/extendable notes, real yield securities, receivable pay-through securities, remarketed reset notes, stripped mortgage backed securities, stripped treasuries/municipals, variable coupon renewable notes, variable rate renewable notes, yield curve/maximum rate notes, adjustable rate preferred stock, auction rate preferred stock, convertible adjustable preferred stock, remarketed preferred stock, single point adjustable rate stock, state rate auction preferred stock, variable cumulative preferred stock, adjustable rate convertible debt, convertible exchangeable preferred stock, convertible reset debentures, debt with mandatory common stock purchase contracts, exchangeable preferred stock, synthetic convertible debt, zero coupon convertible debt, puttable common stock. 
   
   
       9 . The apparatus of  claim 1  wherein the processor is further configured to compute an implied time using an option pricing algorithm, the current price of the particular asset, and the margin requirement for the particular asset, the margin requirement substituted for the option premium and the current price substituted for the exercise price in the calculation of implied time using the option pricing algorithm, and wherein the implied time is used as the time value in the computation of the option premium on an expirationless option contract. 
   
   
       10 . An apparatus for transacting an expirationless option contract comprising:
 an interface for receiving data representative of an option on an asset, wherein the data includes the value of the underlying asset;   a storage medium in communication with the interface to store the data received by the interface and an expirationless option algorithm; and   a processor in communication with the storage medium configured to compute a price on an expirationless option contract using the value of an underlying asset of the option and an option pricing algorithm, wherein the option contract grants the owner of the option contract a right to sell or buy the underlying asset at a predetermined price and wherein the option contract is associated with a guarantor, the guarantor providing a guarantee of performance of the expirationless options contract by a party other than the issuer of the underlying asset.   
   
   
       11 . The apparatus of  claim 10  wherein the data representative of an option on an asset further includes data selected from the group consisting of an option type, an exercise price for the particular asset, the historic price volatility of the particular asset and the margin requirement for the particular asset and combinations thereof. 
   
   
       12 . The apparatus of  claim 10  wherein the asset is a security. 
   
   
       13 . The apparatus of  claim 12  wherein the data representative of an option on an asset further includes data selected from the group consisting of the current market price for the security, an exercise price for the security, the margin price for the security and combinations thereof. 
   
   
       14 . The apparatus of  claim 10  wherein the interface is configured to receive a signal representative of a request to transact an option on an asset. 
   
   
       15 . The apparatus of  claim 10  wherein the option pricing algorithm is selected from the group consisting of the Black-Scholes, the Binomial Pricing, the Finite Difference and the Analytic Approximation algorithms. 
   
   
       16 . The apparatus of  claim 10  wherein the processor is further configured to compute an implied time using an option pricing algorithm, the current price of the particular asset, and the margin requirement for the particular asset, the margin requirement substituted for the option premium and the current price substituted for the exercise price in the calculation of implied time using the option pricing algorithm, and wherein the implied time is used as the time value in the computation of the option premium on an expirationless option contract. 
   
   
       17 . An apparatus for transacting an expirationless option contract comprising:
 an interface for receiving data representative of an option on an asset, wherein the data includes the value of the underlying asset;   a storage medium in communication with the interface to store the data received by the interface and an expirationless option algorithm; and   a processor in communication with the storage medium configured to compute a price on an expirationless option contract using the value of an underlying asset of the option and an option pricing algorithm, wherein the option contract grants the owner of the option contract a right to sell or buy the underlying asset at a predetermined price, said option contractually coupled to a guarantor, the guarantor providing a guarantee of performance of the expirationless options contract by a party other than the issuer of the underlying asset.   
   
   
       18 . The apparatus of  claim 17  wherein the data representative of an option on an asset further includes data selected from the group consisting of an option type, an exercise price for the particular asset, the historic price volatility of the particular asset and the margin requirement for the particular asset and combinations thereof. 
   
   
       19 . The apparatus of  claim 17  wherein the asset is a security. 
   
   
       20 . The apparatus of  claim 19  wherein the data representative of an option on an asset further includes data selected from the group consisting of the current market price for the security, an exercise price for the security, the margin price for the security and combinations thereof. 
   
   
       21 . The apparatus of  claim 17  wherein the interface is configured to receive a signal representative of a request to transact an option on an asset. 
   
   
       22 . The apparatus of  claim 17  wherein the option pricing algorithm is selected from the group consisting of the Black-Scholes, the Binomial Pricing, the Finite Difference and the Analytic Approximation algorithms. 
   
   
       23 . The apparatus of  claim 17  wherein the processor is further configured to compute an implied time using an option pricing algorithm, the current price of the particular asset, and the margin requirement for the particular asset, the margin requirement substituted for the option premium and the current price substituted for the exercise price in the calculation of implied time using the option pricing algorithm, and wherein the implied time is used as the time value in the computation of the option premium on an expirationless option contract. 
   
   
       24 . A automated method for transacting an expiring financial instrument comprising the steps of:
 receiving data representative of an asset value for an asset;   determining an expirationless option value for the asset using a computer, the expirationless option value having a value less than the asset value;   computing a premium for the expiring financial instrument using the expirationless option value; and   offering to sell, buy, or trade said expiring financial instrument at a price calculated utilizing the computed premium.   
   
   
       25 . The method of  claim 24 , further comprising providing a guarantee of performance of said expiring financial instrument, said guarantee insuring against loss by one party to an options transaction resulting from nonperformance of another party to the options transaction. 
   
   
       26 . The method of  claim 24 , wherein said expiring financial instrument is characterized by being limited to contingent claims. 
   
   
       27 . The method of  claim 24 , wherein said expiring financial instrument is an American options contract. 
   
   
       28 . The method of  claim 24 , wherein the step of determining an expirationless option value for an asset comprises:
 generating an implied time to expiration using data representative of the asset value; and   generating a premium for the expiring financial instrument using the implied time to expiration.