System and method for risk management using average expiration times
AssigneeTrading Technologies International, Inc.
InventorJens-Uwe Schluetter
Life of this patent
Estimating the term…
Abstract
A margin requirement is computed while trading. The margin requirement may be calculated while trading because the preferred system takes into account working orders to generate the margin requirement. The on the fly possibility allows the preferred system to provide pre-trade risk calculations, but can also be used to provide post-trade calculations. A generic spread number and the maximum number of outright positions are determined. Average expirations for the generic spread are computed. Using the spread positions, the average expirations and the maximum number of outright positions, a spread margin and an outright margin are calculated, which when summed provide a total margin requirement. Limits based in part on the total margin requirement may be imposed on one or more traders.
Claims24
A method for computing a weighted margin requirement during a trading day in an electronic trading environment, comprising:
- estimating a number of spreads based on a first net filled long position and a first net filled short position corresponding to a first tradeable object and a second net filled long position and a second net short position corresponding to a second tradeable object, and further based on working spread buy and sell positions for exchange provided spreads associated with the first tradeable object and the second tradeable object;
- establishing a first time to expire for the first tradeable object and a second time to expire for the second tradeable object, wherein the first time to expire is determined based on a current time and an expiration date of the first tradeable object, and wherein the second time to expire is based on the current time and an expiration date of the second tradeable object;
- determining a first average expiration time for long positions of the estimated number of spread based on the first net filled long position and the working spread buy position associated with the first tradeable object and the first time to expire for the first tradeable object, and further based on the second net filled long position and the working spread buy position associated with the second tradeable object and the second time to expire for the second tradeable object;
- determining a second average expiration time for short positions of the estimated number of spreads based on the first net filled short position and the working spread sell position associated with the first tradeable object and the first time to expire for the first tradeable object, and further based on the second net filled short position and the working spread sell position associated with the second tradeable object and the second time to expire for the second tradeable object;
- determining an average spread length based on the first average expiration time and the second average expiration time;
- determining a spread margin requirement using the estimated number of spreads, the average spread length, and a spread base value;
- and
- storing the spread margin requirement.
A computer readable medium having program code recorded thereon for execution on a computer to compute a weighted margin requirement during a trading day in an electronic trading environment, comprising:
- estimating a number of spreads based on a first net filled long position and a first net filled short position corresponding to a first tradeable object and a second net filled long position and a second net short position corresponding to a second tradeable object, and further based on working spread buy and sell positions for exchange provided spreads associated with the first tradeable object and the second tradeable object;
- establishing a first time to expire for the first tradeable object and a second time to expire for the second tradeable object, wherein the first time to expire is determined based on a current time and an expiration date of the first tradeable object, and wherein the second time to expire is based on the current time and an expiration date of the second tradeable object;
- determining a first average expiration time for long positions of the estimated number of spread based on the first net filled long position and the working spread buy position associated with the first tradeable object and the first time to expire for the first tradeable object, and further based on the second net filled long position and the working spread buy position associated with the second tradeable object and the second time to expire for the second tradeable object;
- determining a second average expiration time for short positions of the estimated number of spreads based on the first net filled short position and the working spread sell position associated with the first tradeable object and the first time to expire for the first tradeable object, and further based on the second net filled short position and the working spread sell position associated with the second tradeable object and the second time to expire for the second tradeable object;
- determining an average spread length based on the first average expiration time and the second average expiration time;
- determining a spread margin requirement using the estimated number of spreads, the average spread length, and a spread base value;
- and
- storing the spread margin requirement.
Dependencies are inferred from the claim text.