Standardization and Management of Over-the-Counter Financial Instruments

Abstract

A method of managing over-the-counter financial products is disclosed. The method includes receiving transaction parameters associated with an over-the-counter financial product, determining a standardized financial product that reflects the transaction parameters associated with the over-the-counter financial product; calculating a net position based on the difference between the standardized financial product and the over-the-counter financial product, and clearing the net position through a clearing party.

1 . A method of managing financial instruments, the method comprising:
 defining a standardized financial instrument associated with an over-the-counter financial instrument, wherein the standardized financial instrument includes a fixing date and a maturity period;   calculating a net position associated with the standardized financial instrument, wherein the net position is a function of the fixing date;   clearing the calculated net position through a clearing party; and   rolling the standardized financial instrument into a second standardized financial instrument as the maturity period decays into a second maturity period associated with the second standardized financial instrument.   
     
     
         2 . The method of  claim 1 , wherein the standardized financial instrument is a standardized interest rate swap. 
     
     
         3 . The method of  claim 1 , wherein calculating the net position further comprises calculating the net position as a function of a fixing rate determined as of the fixing date. 
     
     
         4 . The method of  claim 1 , wherein calculating the net position comprises calculating the difference between a net present value associated with the over-the-counter financial instrument and a net present value associated with the standardized financial instrument.