Financial System And Method Based On Absolute Returns
Abstract
A financial instrument exchange, system and method based upon the intensity of an underlying index. The instrument having a predetermined formula for a settlement price based at least in part on the formula: AR = [ 1 N ∑ j = 1 N r j ] × C where: N=a number of total observation periods; C=a constant multiplier; and r j =a capped absolute period return calculated using the formula: r j =min( d,|x j |); where: d=a contract period observation cap; and x j =a period return based on a formula of the group consisting of: x j = ln ( I j I j - 1 ) ; and x j = ( I j I j - 1 ) - 1 ; where: I j =a reference index reported price/level j observation periods after an initial observation date/time. The periods can variable and measured in days, weeks, months, quarters and years. The instrument is traded at a market-determined price from creation through the date of expiration.
Claims
exact text as granted — not AI-modifiedWhat is claimed is:
1 . A method of providing a settlement price for a futures contract to a user comprising:
calculating, using software executing on a computer, a settlement price (AR) of a futures contract by averaging absolute returns of an underlying reference index over an observation window; transmitting said settlement price to a market participant.
2 . The method of claim 1 , wherein the settlement price (AR) is calculated based at least in part on the following formula:
AR
=
[
1
N
∑
j
=
1
N
r
j
]
wherein:
N=a number of total observation periods; and
r j =min(d,|x j |)
wherein:
d=a contract period Observation Cap; and
x j =a return based on a formula of the group consisting of:
x
j
=
ln
(
I
j
I
j
-
1
)
;
x
j
=
(
I
j
I
j
-
1
)
-
1
;
and
x
j
=
I
j
-
I
j
-
1
;
wherein:
I j =a reference index reported price/level j observation periods after an initial observation date/time.
3 . The method of claim 2 , further including providing the market participant an actual realized intensity (RR) of the futures contract based at least in part on the following formula:
RR
=
1
n
∑
j
=
1
n
r
j
;
wherein:
n=the number of observation periods from an initial observation date/time.
4 . The method of claim 3 , further including providing the market participant an expected forward average capped absolute return (FR) of the futures contract based at least in part on the following formula:
FR
=
AR
-
n
N
RR
(
1
-
n
N
)
.
5 . The method of claim 4 , further including providing the market participant at least one Forward Intensity Rolling Rate Index (FRR), Forward Intensity Rolling Rate Periodic Compound Index (FRRC), or Forward Intensity Rolling Rate Periodic Compound Index Return (FRRCret) value, wherein FRR, FRRC, and FRRCret are based at least in part on the following formulas:
FRR
=
(
1
-
n
N
)
FR
1
+
n
N
A
R
2
;
FRRC
(
t
)
=
FRRC
(
t
-
1
)
×
(
1
+
m
×
(
FRRCret
(
t
)
-
1
)
)
;
FRRCret
(
t
)
=
AR
1
(
t
)
-
(
n
N
)
RR
1
(
t
-
1
)
+
n
N
A
R
2
(
t
)
AR
1
(
t
-
1
)
-
(
n
N
)
RR
1
(
t
-
1
)
+
n
N
AR
2
(
t
-
1
)
.
6 . The method according to claim 2 , including providing the market participant a Historical Rolling Average Intensity Rate (HAR) value based at least in part on the following formula:
HAR
=
[
1
K
∑
j
=
1
K
r
j
]
;
wherein:
K=a number of historical observation periods.
7 . The method of claim 2 , wherein x j is based on the formula:
x
j
=
ln
(
I
j
I
j
-
1
)
.
8 . The method of claim 2 , wherein x j is based on the formula:
x
j
=
(
I
j
I
j
-
1
)
-
1.
9 . The method of claim 2 , wherein x j is based on the formula:
x j =I j −I j-1 .
10 . The method of claim 1 , wherein the observation window is fixed.
11 . The method of claim 1 , further including trading said futures contract with said market participant at said settlement price.
12 . A system for providing a settlement price for a futures contract, comprising:
at least one server; software executing on said at least one server calculating a settlement price of a futures contract by averaging absolute returns of an underlying reference index over an observation window; software executing on said at least one server transmitting the settlement price of said futures contract to a market participant.
13 . The system according to claim 12 , wherein the settlement price (AR) is calculated based at least in part on the following formula:
AR
=
[
1
n
∑
j
=
1
n
r
j
]
wherein:
N=a number of total observation periods; and
r j =min(d,|x j |)
wherein:
d=a contract period Observation Cap; and
x j =a return based on a formula of the group consisting of:
x
j
=
ln
(
I
j
I
j
-
1
)
;
x
j
=
(
I
j
I
j
-
1
)
-
1
;
and
x
j
=
I
j
-
I
j
-
1
;
wherein:
I j =a reference index reported price/level j observation periods after an initial observation date/time.
14 . The system according to claim 13 , further including providing the market participant a actual realized intensity (RR) of the futures contract based at least in part on the following formula:
RR
=
1
n
∑
j
=
1
n
r
j
;
wherein:
n=the number of observation periods from an initial observation date/time.
15 . The system according to claim 14 , further including providing the market participant an expected forward average capped absolute return (FR) of the futures contract based at least in part on the following formula:
FR
=
AR
-
n
N
RR
(
1
-
n
N
)
.
16 . The system according to claim 15 , further including providing the market participant at least one Forward Intensity Rolling Rate Index (FRR), Forward Intensity Rolling Rate Periodic Compound index (FRRC), or Forward Intensity Rolling Rate Periodic Compound index Return (FRRCret) value, wherein FRR, FRRC, and FRRCret are based at least in part on the following formulas:
FRR
=
(
1
-
n
N
)
FR
1
+
n
N
A
R
2
;
FRRC
(
t
)
=
FRRC
(
t
-
1
)
×
(
1
+
m
×
(
FRRCret
(
t
)
-
1
)
)
;
FRRCret
(
t
)
=
AR
1
(
t
)
-
(
n
N
)
RR
1
(
t
-
1
)
+
n
N
A
R
2
(
t
)
AR
1
(
t
-
1
)
-
(
n
N
)
RR
1
(
t
-
1
)
+
n
N
AR
2
(
t
-
1
)
.
17 . The system according to claim 13 , including providing the market participant a Historical Rolling Average intensity Rate (HAR) value based at least in part on the following formula:
HAR
=
[
1
K
∑
j
=
1
K
r
j
]
;
wherein:
K=a number of historical observation periods.
18 . The system according to claim 13 , wherein x j is based on the formula:
x
j
=
ln
(
I
j
I
j
-
1
)
.
19 . The system according to claim 13 , wherein x j is based on the formula:
x
j
=
(
I
j
I
j
-
1
)
-
1.
20 . The system according to claim 13 , wherein x j is based on the formula:
x j =I j −I j-1 .
21 . The system according to claim 12 , wherein the observation window is fixed.
22 . The system according to claim 12 , further including trading said futures contract with said market participant at said settlement price.Join the waitlist — get patent alerts
Track US2014156491A1 — get alerts on status changes and closely related new filings.
We store only your email — no account needed. See our privacy policy.