Derivatives having demand-based, adjustable returns, and trading exchange therefor

A method for investing, comprising:

• providing to an auction an indication of at least one parameter of a derivatives strategy on at least one event;
• and
• receiving an indication of a price for the derivatives strategy, the price being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A computer system for conducting demand-based trading auction, comprising:

• at least one processor configured to:
• determine at least one parameter of a contingent claim, in a replication set of at least one contingent claim, as a function of at least one parameter of the derivatives strategy and an outcome of the event;
• and
• determine an investment amount for the contingent claim in the replication set as a function of the at least one parameter of the contingent claim and a total amount invested in the demand-based auction.

A computer system for determining an investment amount for an order of a derivatives strategy in a demand-based trading auction on an event, comprising:

• at least one processor configured to:
• receive an indication of at least one parameter of a derivatives strategy;
• and
• determine an investment amount for the order, the investment amount being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set being determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A computer system for placing an order to invest in a demand-based trading auction, comprising:

• at least one processor configured to:
• provide to an auction an indication of at least one parameter of a derivatives strategy on at least one event;
• and
• receive an indication of a price for the derivatives strategy, the price being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A method for executing a trade, comprising:

• receiving an order, the order including an indication of at least one parameter of a derivatives strategy on at least one event;
• determining investment amounts of contingent claims in a replication set of the derivatives strategy as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• determining desired payouts of the contingent claims in the replication set as a function of the at least one parameter of the derivatives strategy and possible outcomes of the event;
• determining a price for the order as a function of the investment amounts and the desired payouts of the contingent claims in the replication set of the derivatives strategy;
• transmitting an indication of the determined price for the order;
• and
• receiving an indication of a decision to place the order for the determined price.

A method for providing financial advice, comprising:

• providing a person with advice about an order of one of a purchase and a sale of a derivatives strategy in a demand-based trading auction on at least one event, the order indicating at least one parameter of the derivatives strategy and a price for the order, the price being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A method of hedging comprising:

• determining an investment risk in at least one investment;
• and reducing the investment risk by taking a position with an opposing risk in a derivatives strategy in a demand-based trading auction on an event, a price for the derivatives strategy being as determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A method of speculation comprising:

• determining an investment risk in at least one investment;
• and increasing the investment risk by taking a position with a similar risk in a derivatives strategy in a demand-based trading auction on an event, a price for the derivatives strategy being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

An article of manufacture comprising an information storage medium encoded with a computer-readable data structure adapted for use in placing an order in a demand-based trading auction on an event over the Internet, said data structure comprising:

• at least one data field with information identifying a type of derivatives strategy for the order;
• and at least one data field with information identifying a price for the order, the price being determined as a function of investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

A derivatives strategy tradeable in a demand-based trading auction comprising:

• a designation of at least one parameter of a derivatives strategy on an event;
• and an investment amount for the derivatives strategy, the investment amount being dependent upon the first designation, and investment amounts and desired payouts of contingent claims in a replication set of the derivatives strategy;
• wherein the investment amounts of the contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and a total amount invested in the auction;
• and
• wherein the desired payouts of contingent claims in the replication set are determined as a function of the at least one parameter of the derivatives strategy and an outcome of the event.

An article of manufacture comprising a propagated signal adapted for use in the performance of a method for demand-based trading on an event,

• a. the method comprising the steps of:
• determining at least one parameter of a contingent claim, in a replication set of at least one contingent claim, as a function of at least one parameter of the derivatives strategy and an outcome of the event;
• and
• determining an investment amount for the contingent claim in the replication set as a function of the at least one parameter of the contingent claim and a total amount invested in the demand-based auction.
• b. the signal encoded with machine-readable information relating to a demand-based trade.