Financial activity based on natural peril events

A computer implemented method for automatically pricing financial products in a financial activity for a plurality of possible outcomes, consistent with the risks as perceived at any given time by the activity participants, comprising the steps of:

• receiving a first request from a first participant terminal of a plurality of participant terminals to purchase a financial product for one outcome of the possible outcomes, i;
• electronically computing a price for the financial product based at least in part on the following first formula:
• Pit=Kπit=K[πit−1+αtπit−1(1−πit−1)]
• where
• i designates the one outcome requested by the first participant,
• t is a time index counter designating the current purchase requested by the first participant,
• t−1 is a time index counter designating a last previous purchase,
• Pit is the price for the financial product,
• K=c exp[rj/365],
• c is a money amount used as a scaling constant,
• r is a constant proportional to a short term annualized interest rate,
• j is a number of days since the financial activity was started,
• πit is the current pricing probability for outcome i,
• πit−1 is the last previously computed pricing probability for outcome i,
• αt is a price adjustment parameter, having a value greater than 0 and less than 0.1;
• automatically updating prices for all other outcomes of the possible outcomes based at least in part on the following second formula:
• Pkt=Kπkt=K[πkt−1(1−αtπit−1)], k≠i
• where
• k, where k≠i, represents a set of said all other outcomes of the possible outcomes,
• t is the time index counter designating the current purchase requested by the first participant,
• t−1 is the time index counter designating the last previous purchase,
• Pkt, where k≠i, is a set of all other prices, updated to take into account the current purchase requested by the first participant, πkt is the current pricing probability for outcome k, πkt−1 is the latest computed pricing probability for outcome k, πit−1 is the last previously computed pricing probability for outcome i,
• K=c exp[rj/365],
• c is the money amount used as the scaling constant,
• r is a constant proportional to the short term annualized interest rate,
• j is the number of days since the financial activity was started, and
• αt is a price adjustment parameter, having a value between greater than 0 and less than 0.1 and
• delivering the price for the financial product of the first request to the first participant terminal.

A computer implemented system for automatically setting prices of financial products in a financial activity having a plurality of possible outcomes, comprising:

• a network configured to receive a first request from a first participant terminal of a plurality of participant terminals to purchase a financial product for one outcome of the possible outcomes, i;
• a computer having memory with a data structure stored in said memory, said data structure comprising the following first formula:
• Pit=Kπit=K[πit−1(1−πit−1)]
• where
• i designates the one outcome requested by the first participant,
• t is a time index counter designating the current purchase requested by the first participant,
• t−1 is a time index counter designating a last previous purchase,
• it is the price for the financial product,
• K=c exp[rj/365],
• c is a money amount used as a scaling constant,
• r is a constant proportional to a short term annualized interest rate,
• j is a number of days since the financial activity was started,
• πit is the current pricing probability for outcome i,
• πit−1 is the last previously computed pricing probability for outcome i,
• αt is a price adjustment parameter, having a value greater than 0 and less than 0.1;
• and
• wherein the computer executes instructions to electronically compute a price for the financial product, in response to the first request, based at least in part on the first formula and to deliver the price for the financial product of the first request to the first participant terminal.

An article of manufacture including a non-transitory machine readable medium for causing a computer system to automatically set prices of financial products in a financial activity having a plurality of possible outcomes, the non-transitory machine readable medium comprising:

• instructions to receive a first request from a first participant terminal of a plurality of participant terminals to purchase a financial product for one outcome of the possible outcomes, i;
• a data structure comprising the following first formula:
• Pit=Kπit=K[πit−1+αtπit−1(1−πit−1)]
• where
• i designates the one outcome requested by the first participant,
• t is a time index counter designating the current purchase requested by the first participant,
• t−1 is a time index counter designating a last previous purchase,
• Pit is a price for the financial product,
• K=c exp[rj/365],
• c is a money amount used as a scaling constant,
• r is a constant proportional to a short term annualized interest rate,
• j is a number of days since the financial activity was started,
• πit is current pricing probability for outcome i,
• πit−1 is the last previously computed pricing probability for outcome i,
• αt is a price adjustment parameter, having a value greater than 0 and less than 0.1;
• and
• instructions to electronically compute the price for the financial product, in response to the first request, based at least in part on the first formula and to deliver the price for the financial product of the first request to the first participant terminal.