# US 2014/0156491 A1 · Financial System And Method Based On Absolute Returns

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- Number: US 2014/0156491 A1
- Document ID: US20140156491A1
- Status: Published application
- Kind: A1
- Application number: 14/172,403
- Filed: 2014-02-04
- Published: 2014-06-05
- Earliest claimed: 2012-11-07
- Inventors: Thong Wei Koh
- Web page: https://patentgrep.com/patent/US20140156491A1

## CPC

- G06Q 40/04: Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
- G06Q 40/06: Asset management; Financial planning or analysis
- G06Q 40/08: Insurance
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## 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.

## Claims

### Claim 1

A method of providing a settlement price for a futures contract to a user comprising:
calculating, using software executing on a computer, a settlement price (AR) of a futures contract by averaging absolute returns of an underlying reference index over an observation window;
transmitting said settlement price to a market participant.

### Claim 2 (depends on 1)

The method of claim 1, wherein the settlement price (AR) is calculated based at least in part on the following formula:
AR
=
[
1
N

∑
j
=
1
N


r
j
]
wherein:
N=a number of total observation periods; and
rj=min(d,|xj|)
wherein:
d=a contract period Observation Cap; and
xj=a return based on a formula of the group consisting of:
x
j
=
ln

(
I
j
I
j
-
1
)
;
x
j
=
(
I
j
I
j
-
1
)
-
1
;
and
x
j
=
I
j
-
I
j
-
1
;
wherein:
Ij=a reference index reported price/level j observation periods after an initial observation date/time.

### Claim 3 (depends on 2)

The method of claim 2, further including providing the market participant an actual realized intensity (RR) of the futures contract based at least in part on the following formula:
RR
=
1
n

∑
j
=
1
n

r
j
;
wherein:
n=the number of observation periods from an initial observation date/time.

### Claim 4 (depends on 3)

The method of claim 3, further including providing the market participant an expected forward average capped absolute return (FR) of the futures contract based at least in part on the following formula:
FR
=
AR
-
n
N

RR
(
1
-
n
N
)
.

### Claim 5 (depends on 4)

The method of claim 4, further including providing the market participant at least one Forward Intensity Rolling Rate Index (FRR), Forward Intensity Rolling Rate Periodic Compound Index (FRRC), or Forward Intensity Rolling Rate Periodic Compound Index Return (FRRCret) value, wherein FRR, FRRC, and FRRCret are based at least in part on the following formulas:
FRR
=
(
1
-
n
N
)

FR
1
+
n
N

A


R
2
;
FRRC

(
t
)
=
FRRC

(
t
-
1
)
×
(
1
+
m
×
(
FRRCret

(
t
)
-
1
)
)
;
FRRCret

(
t
)
=
AR
1

(
t
)
-
(
n
N
)

RR
1

(
t
-
1
)
+
n
N

A


R
2

(
t
)
AR
1

(
t
-
1
)
-
(
n
N
)

RR
1

(
t
-
1
)
+
n
N

AR
2

(
t
-
1
)
.

### Claim 6 (depends on 2)

The method according to claim 2, including providing the market participant a Historical Rolling Average Intensity Rate (HAR) value based at least in part on the following formula:
HAR
=
[
1
K

∑
j
=
1
K

r
j
]
;
wherein:
K=a number of historical observation periods.

### Claim 7 (depends on 2)

The method of claim 2, wherein xj is based on the formula:
x
j
=
ln

(
I
j
I
j
-
1
)
.

### Claim 8 (depends on 2)

The method of claim 2, wherein xj is based on the formula:
x
j
=
(
I
j
I
j
-
1
)
-
1.

### Claim 9 (depends on 2)

The method of claim 2, wherein xj is based on the formula:
xj=Ij−Ij-1.

### Claim 10 (depends on 1)

The method of claim 1, wherein the observation window is fixed.

### Claim 11 (depends on 1)

The method of claim 1, further including trading said futures contract with said market participant at said settlement price.

### Claim 12

A system for providing a settlement price for a futures contract, comprising:
at least one server;
software executing on said at least one server calculating a settlement price of a futures contract by averaging absolute returns of an underlying reference index over an observation window;
software executing on said at least one server transmitting the settlement price of said futures contract to a market participant.

### Claim 13 (depends on 12)

The system according to claim 12, wherein the settlement price (AR) is calculated based at least in part on the following formula:
AR
=
[
1
n

∑
j
=
1
n

r
j
]
wherein:
N=a number of total observation periods; and
rj=min(d,|xj|)
wherein:
d=a contract period Observation Cap; and
xj=a return based on a formula of the group consisting of:
x
j
=
ln

(
I
j
I
j
-
1
)
;
x
j
=
(
I
j
I
j
-
1
)
-
1
;
and
x
j
=
I
j
-
I
j
-
1
;
wherein:
Ij=a reference index reported price/level j observation periods after an initial observation date/time.

### Claim 14 (depends on 13)

The system according to claim 13, further including providing the market participant a actual realized intensity (RR) of the futures contract based at least in part on the following formula:
RR
=
1
n

∑
j
=
1
n

r
j
;
wherein:
n=the number of observation periods from an initial observation date/time.

### Claim 15 (depends on 14)

The system according to claim 14, further including providing the market participant an expected forward average capped absolute return (FR) of the futures contract based at least in part on the following formula:
FR
=
AR
-
n
N

RR
(
1
-
n
N
)
.

### Claim 16 (depends on 15)

The system according to claim 15, further including providing the market participant at least one Forward Intensity Rolling Rate Index (FRR), Forward Intensity Rolling Rate Periodic Compound index (FRRC), or Forward Intensity Rolling Rate Periodic Compound index Return (FRRCret) value, wherein FRR, FRRC, and FRRCret are based at least in part on the following formulas:
FRR
=
(
1
-
n
N
)

FR
1
+
n
N

A


R
2
;
FRRC

(
t
)
=
FRRC

(
t
-
1
)
×
(
1
+
m
×
(
FRRCret

(
t
)
-
1
)
)
;
FRRCret

(
t
)
=
AR
1

(
t
)
-
(
n
N
)

RR
1

(
t
-
1
)
+
n
N

A


R
2

(
t
)
AR
1

(
t
-
1
)
-
(
n
N
)

RR
1

(
t
-
1
)
+
n
N

AR
2

(
t
-
1
)
.

### Claim 17 (depends on 13)

The system according to claim 13, including providing the market participant a Historical Rolling Average intensity Rate (HAR) value based at least in part on the following formula:
HAR
=
[
1
K

∑
j
=
1
K

r
j
]
;
wherein:
K=a number of historical observation periods.

### Claim 18 (depends on 13)

The system according to claim 13, wherein xj is based on the formula:
x
j
=
ln

(
I
j
I
j
-
1
)
.

### Claim 19 (depends on 13)

The system according to claim 13, wherein xj is based on the formula:
x
j
=
(
I
j
I
j
-
1
)
-
1.

### Claim 20 (depends on 13)

The system according to claim 13, wherein xj is based on the formula:
xj=Ij−Ij-1.

### Claim 21 (depends on 12)

The system according to claim 12, wherein the observation window is fixed.

### Claim 22 (depends on 12)

The system according to claim 12, further including trading said futures contract with said market participant at said settlement price.