Portfolio hedging method
AssigneeMorgan Stanley
InventorJohn A.C. Woodley
Life of this patent
Estimating the term…
Abstract
A method and system is provided by which an entity manages an exposure to an economic risk associated with a commodity and initially includes the step of modeling the exposure to the risk using financial instruments such as forward contracts and option contracts. Next, a hedge for the exposure is executed. Liquidated cash flows, that are based on the modeled exposure and said hedge, are periodically calculated. If liquidated cash flows are positive, a payout is provided to the entity while a payout is received from the entity if the liquidated cash flows are negative. In an exemplary embodiment, the liquidated cash flows are marked to the market.
Claims55
A method by which an entity manages an exposure to an economic risk associated with a commodity, comprising the steps of:
- forming a model portfolio of said exposure, said model representing cash flows;
- forming a hedging portfolio for said exposure, said hedging portfolio representing cash flows;
- periodically combining said cash flows of said model portfolio and said hedging portfolio;
- and
- providing a payout based on said combined cash flows.
A system by which an entity manages a portfolio of exposures to an economic risk associated with a commodity, comprising:
- a portfolio modeling engine, said portfolio modeling engine receiving said portfolio of exposures from said entity and forming a model portfolio representing cash flows;
- a hedging modeling engine for receiving at least one hedging transaction, said hedging modeling engine forming a hedging portfolio representing cash flows based on said at least one hedging transaction and said model portfolio;
- a tracking portfolio generator, said tracking portfolio generator receiving said model portfolio and said hedging portfolio and combining said cash flows of said model portfolio and said hedging portfolio;
- and
- a payout manager, said payout manager providing a payout based on said combined cash flows.
A system by which an entity manages a portfolio of exposures to an economic risk associated with a commodity, comprising:
- a transaction manager, said transaction manager executing at least one transaction between an institution and said entity, said at least one transaction forming a model portfolio representing cash flows;
- a hedging module for executing at least one hedging transaction, said at least one hedging transaction forming a hedging portfolio representing cash flows;
- a tracking portfolio generator, said tracking portfolio generator receiving said model portfolio and said hedging portfolio and combining said cash flows of said model portfolio and said hedging portfolio;
- and
- a payout manager, said payout manager providing a payout based on said combined cash flows.
Dependencies are inferred from the claim text.