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 rj=a capped absolute period return calculated using the formula: rj=min(d,|xj|); where: d=a contract period observation cap; and xj=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: Ij=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.

Dependencies are inferred from the claim text.