System for pricing financial instruments

A method for hedging an investment in an actively managed exchange traded fund comprising:

• sending, from a first computer, a set of instruments to be used as hedging instruments over a computer network to a second computer;
• receiving from the second computer a corresponding coefficient for each instrument to be used as a hedging instrument;
• and
• constructing a hedging portfolio by applying the corresponding coefficient to each instrument to be used as a hedging instrument;
• wherein the hedging portfolio has substantially the same levels of risk associated with risk factors as the levels of risk of the portfolio of securities held in the actively managed exchange traded fund associated with the risk factors, and wherein the actual composition of the actively managed exchange traded fund is unknown to an investor hedging an investment in the actively managed exchange traded fund.

A method for hedging an investment in an actively managed exchange traded fund comprising:

• receiving from a second computer data indicative of a basket of instruments, wherein the basket of instruments, the basket of instruments having substantially the same levels of risk associated with risk factors as the levels of risk of the portfolio of securities held in the actively managed exchange traded fund associated with the risk factors;
• and
• using a first computer to construct a hedging portfolio, the hedging portfolio having substantially the same levels of risk associated with the risk factors as the levels of risk of the basket of instruments associated with the risk factors;
• wherein the actual composition of the actively managed exchange traded fund is unknown to an investor hedging an investment in the actively managed exchange traded fund.

A method for calculating a hedging portfolio for hedging an investment in an actively managed exchange traded fund, comprising:

• receiving, from a first computer over a computer network, a set of instruments to be used as hedging instruments to hedge an investment in the actively managed exchange traded fund;
• calculating a set of coefficients corresponding to the set of instruments, wherein a portfolio constructed by applying corresponding coefficients to each instrument, has substantially the same levels of risk associated with risk factors as the levels of risk of the portfolio of securities held in the actively managed exchange traded fund associated with the risk factors;
• and
• sending the set of coefficients to the first computer over the computer network;
• wherein the actual composition of the actively managed exchange traded fund is unknown to an investor hedging an investment in the actively managed exchange traded fund.

A method to allow hedging an investment in an actively managed exchange traded fund, comprising:

• calculating on a first computer a set of coefficients corresponding to a set of instruments, wherein a portfolio constructed by applying corresponding coefficients to each instrument has substantially the same levels of risk associated with risk factors as the levels of risk of the portfolio of securities held in the actively managed exchange traded fund associated with the risk factors;
• and
• sending data indicating the portfolio constructed by applying the corresponding coefficients to each instrument over a computer network to a second computer;
• wherein the actual composition of the actively managed exchange traded fund is unknown to an investor hedging an investment in the actively managed exchange traded fund.