Method and system for pricing financial derivatives

Abstract

A method for providing a bid price and/or an offer price of an option relating to an underlying asset, the method including the steps of receiving first input data corresponding to a plurality of parameters defining the option, receiving second input data corresponding to a plurality of current market conditions relating to the underlying value, computing a corrected theoretical value (CTV) of the option based on the first and second input data, computing a bid/offer spread of the option based on the first and input data, computing a bid price and/or an offer price of the option based on the corrected TV and the bid/offer spread, and providing an output corresponding to the bid price and/or the offer price of said option.

1 - 52 . (canceled) 
     
     
         53 . A computer-based method of on-line execution of option transactions, the method comprising:
 receiving, by a computing device, first data corresponding to at least one parameter defining an option on an underlying asset;   receiving, by the computing device, second data including real-time data of at least one real-time current market condition relating to said underlying asset;   determining, by the computing device, a bid price and an offer price corresponding to said option by setting a bid/offer spread between the bid price and the offer price based on the first and second data; and   executing, by the computing device, at least one on-line transaction of the option using at least one price selected from the group consisting of the bid price and the offer price.   
     
     
         54 . The method of  claim 53 , wherein executing said transaction comprises selling said option at said offer price. 
     
     
         55 . The method of  claim 53 , wherein executing said transaction comprises buying said option at said bid price. 
     
     
         56 . The method of  claim 53  comprising executing said transaction via a communication network. 
     
     
         57 . The method of  claim 53 , wherein said first data comprises an indication of at least one element selected from the group consisting of a type of said option, an expiration date of said option, a trigger for said option, and a strike of said option. 
     
     
         58 . The method of  claim 53 , wherein said second data comprises an indication of at least one element selected from the group consisting of a spot value, an interest rate, a volatility, an at-the-money volatility, a 25 delta risk reversal, a 25 delta butterfly, and a 25 delta strangle. 
     
     
         59 . The method of  claim 53  comprising computing said bid/offer spread based on a corrected theoretical value of said option. 
     
     
         60 . The method of  claim 59 , wherein computing said bid/offer spread comprises:
 computing a base value for the bid/offer spread using at least part of said first and second data; and   computing said bid/offer spread by correcting said base value using at least part of said first and second data.   
     
     
         61 . The method of  claim 53 , wherein said underlying asset comprises a financial asset. 
     
     
         62 . The method of  claim 61 , wherein said option is a foreign exchange (FX) option, a Vanilla option, an option-like financial derivative, or an exotic option. 
     
     
         63 . The method of  claim 53 , wherein said underlying asset is related to at least one of a commodity, a stock, a bond, an interest rate, and a weather. 
     
     
         64 . A system of on-line execution of option transactions, the system comprising:
 a server to receive via a communication network first data corresponding to at least one parameter defining an option on an underlying asset, and second data including real-time data of at least one real-time current market condition relating to said underlying asset; and   a processor to determine in real time a bid price and an offer price corresponding to said option by setting a bid/offer spread between the bid price and the offer price based on the first and second data,   wherein said server is to execute over the communication network at least one on-line transaction of the option using at least one price selected from the group consisting of the bid price and the offer price.   
     
     
         65 . The system of  claim 64 , wherein said server is to execute said transaction by selling said option at said offer price. 
     
     
         66 . The system of  claim 64 , wherein said server is to execute said transaction by buying said option at said bid price. 
     
     
         67 . The system of  claim 64 , wherein said first data comprises an indication of at least one element selected from the group consisting of a type of said option, an expiration date of said option, a trigger for said option, and a strike of said option. 
     
     
         68 . The system of  claim 64 , wherein said second data comprises an indication of at least one element selected from the group consisting of a spot value, an interest rate, a volatility, an at-the-money volatility, a 25 delta risk reversal, a 25 delta butterfly, and a 25 delta strangle. 
     
     
         69 . The system of  claim 64 , wherein said processor is to determine said bid/offer spread based on a corrected theoretical value of said option. 
     
     
         70 . The system of  claim 69 , wherein said processor is to determine a base value for the bid/offer spread using at least part of said first and second data; and to determine said bid/offer spread by correcting said base value using at least part of said first and second data. 
     
     
         71 . The system of  claim 64 , wherein said underlying asset comprises a financial asset. 
     
     
         72 . The system of  claim 71 , wherein said option is a foreign exchange (FX) option, a Vanilla option, an option-like financial derivative, or an exotic option. 
     
     
         73 . The system of  claim 64 , wherein said underlying asset is related to at least one of a commodity, a stock, a bond, an interest rate, and a weather.