Swap index

Abstract

A set of indices is provided which allows accurate tracking of interest rate swap (IRS) markets. The indices are calculated using market data and synthetic purchasing and selling of synthetic interest rate swaps utilizing the present market data. The value of the synthetic interest rate swaps are the basis for the value of a particular index. The purchasing and selling of the synthetic interest rate swap occurs at a frequency to minimize effects of shortening terms on the index. One subset of the IRS indices reflects a plain-vanilla swap for a specific term of years. Another subset of the IRS indices reflects a spread between two specific terms of years. A third subset of the IRS indices reflect two spreads, sometimes referred to as a butterfly, between a middle term of years and a shorter term of years and the same middle term of years and a longer term of years.

1 - 75 . (canceled) 
     
     
         76 . A system for determining a value of a derivative financial instrument, comprising:
 a. a software package on a computer;   b. a real-time interface that connects the computer to a market data source that supplies market data to the software, the market data comprising at least one of a first financial instrument bid price and a first financial instrument offer price,
 i. a first financial instrument yield determined by the software from at least one of the first financial instrument bid price and the first financial instrument offer price; 
   c. a calculating section of the computer that receives the first financial instrument yield from the software and calculates an index using the first financial instrument yield in determining a first stream of synthetic future payments from a first leg of a hypothetical swap,
 i. the calculating section rebalances the index at a predetermined frequency by synthetically selling the hypothetical swap and synthetically rebuying the hypothetical swap; 
   d. a distribution interface that makes the index available to a plurality of entities interested in the index and enabling a portion of the entities to determine the value of their derivative financial instrument as a product of a notional value of their derivative financial instrument and the index.   
     
     
         77 . The system of  claim 76  further comprising:
 a. a communication network connected to the real-time interface and the market data source through which the market data is retrieved, participation in a market for the first financial instrument being widely open, the first financial instrument yield is variable according to the market. 
 
     
     
         78 . The system of  claim 76  wherein a second stream of synthetic future payments for a second leg of the hypothetical swap is utilized by the calculating section to determine the index. 
     
     
         79 . The system of  claim 78  further wherein the calculating section utilizes modified first and second streams of synthetic future payments that correct for a future value of the first and second streams of synthetic future payments in determining the index. 
     
     
         80 . The system of  claim 76  wherein the swap has at least two legs, the index is calculated at a minimum every business day and the first stream of synthetic future payments is determined utilizing mark to market accounting. 
     
     
         81 . The system of  claim 76  wherein the first stream of synthetic future payments comprises a plurality of payments, each of which is discounted by a zero coupon bond yield curve prior to calculation of the index. 
     
     
         82 . The system of  claim 76  further comprising:
 a. a single counterparty to all purchases and sales of the derivative financial instrument. 
 
     
     
         83 . A system for determining a value of a derivative financial instrument, comprising:
 a. a computer;   b. a financial market software package operating on the computer;   c. a real-time interface connected to the computer and, via a network, to a financial instrument market, the financial instrument market providing market data to the financial market software,   d. a calculating section of the computer which calculates an index based on a hypothetical swap having two or more legs, the market data sufficient to calculate a first plurality of synthetic future payments for at least a first leg of the hypothetical swap, the plurality of synthetic future payments utilized in determining the index,
 i. the calculating section determines a rebalance of the index at a predetermined frequency, the rebalance comprising the result of a synthetic sale of the hypothetical swap and the synthetic purchase of the hypothetical swap; 
   e. a distribution interface connected to the computer and the network that makes the index available to a plurality of users, and   f. a notional value assigned to the derivative financial instrument, whereby the value of the derivative financial instrument is a multiplication product of the notional value and the index.   
     
     
         84 . The system of  claim 83  further wherein the first leg of the swap has a first set of parameters that determine the first plurality of synthetic future payments;
 and a second leg of the swap has a second set of parameters that determine a second plurality of synthetic future payments, the second set of parameters including a variable parameter determined from the market data and not contained in the first set of parameters. 
 
     
     
         85 . The system of  claim 84  wherein the variable parameter is at least one of a financial instrument price, financial instrument yield and financial instrument interest rate. 
     
     
         86 . The system of  claim 84  wherein the first set of parameters includes an interest rate having a fixed rate over a term of the swap. 
     
     
         87 . The system of  claim 84  wherein the derivative financial instrument is purchased and sold on an essentially transparent market. 
     
     
         88 . The system of  claim 87  wherein a single counterparty exists to all purchases and sales of the derivative financial instrument. 
     
     
         89 . The system of  claim 83  wherein the derivative financial instrument is either a bought financial instrument or a sold financial instrument and further wherein the derivative financial instrument value for a bought financial instrument increases proportionally to the index and the derivative financial instrument value for a sold financial instrument decreases proportionally to the index. 
     
     
         90 . The system of  claim 83  wherein the hypothetical swap is for a term, the term being one of the first set of parameters and the second set of parameters. 
     
     
         91 . The system of  claim 90  wherein the parameters include a yield curve, the yield curve utilized by the software and computer and operating on the first stream of payments. 
     
     
         92 . The system of  claim 91  wherein the software and computer discounts the first plurality of synthetic future payments by a zero coupon bond yield curve. 
     
     
         93 . A system for determining a value of a derivative financial instrument, comprising:
 a. a software package on a computer;   b. data collecting means for connecting the computer to a market data source and collecting real-time market data from the market data source, the market data sufficient to determine a first financial instrument yield;   c. first payment stream calculating means for determining a first stream of synthetic future payments from a first leg of a hypothetical swap utilizing the first financial instrument yield;   d. second payment stream calculating means for determining a second stream of synthetic future payments from a second leg of the hypothetical swap;   e. index tracking means for calculating an index utilizing the output from the first and second payment stream calculating means;   f. correction means for rebalancing the index at a predetermined frequency by synthetically selling the hypothetical swap and synthetically rebuying the hypothetical swap; and   g. the value of the derivative financial instrument determined by multiplying the index by a notional value.   
     
     
         94 . The system of  claim 93  further comprising:
 a. means for factoring into the index the mark-to-market values of the first and second streams of synthetic future payments.