US 8,510,210 B1Granted

Methods and systems for creating an interest rate swap volatility index and trading derivative products based thereon

AssigneeChicago Board Options Exchange, Incorporated

InventorsYoshiki Obayashi, Antonio Mele

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Abstract

Systems and methods for creating and disseminating an interest rate swap volatility index based on an underlying interest rate swaption, and for creating and trading derivative investment products based on the interest rate swap volatility index, are disclosed. In one aspect, an interest rate swap volatility index based on an underlying interest rate swaption is calculated. The interest rate swap volatility index may be accessed by a processor of a trading platform and a standardized, exchange traded derivative may be created based on the calculated interest rate swap volatility index. Information associated with the interest rate swap volatility index derivative may then be transmitted for display.

Claims12

Dependent claims

A computer-implemented method of calculating an interest rate swap volatility index reflecting a measure of expected future interest rate swap volatility, the method comprising:

with a processor in a trading platform:
calculating with the processor the interest rate swap volatility index, where the interest rate swap volatility index is a swaption-implied measure of expected future interest rate swap volatility associated with at least one underlying interest rate swaption;
wherein calculating the interest rate swap volatility index comprises the processor aggregating prices of at-the-money and out-of-the-money receiver and payer interest rate swaptions and the interest rate swap volatility index at time t is calculated according to an equation:
IRS
-
VI
n
BP
⁡
(
t
,
T
)
≡
1
T
-
t
⁢
2
PVBP
t
⁡
(
T
1
,
…
⁢
,
T
n
)
[
∑
i
:
K
i
<
R
t
⁢
SWPN
t
R
⁡
(
K
i
,
T
;
T
n
)
⁢
Δ
⁢
⁢
K
i
+
∑
i
:
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i
≥
R
t
⁢
SWPN
t
P
⁡
(
K
i
,
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;
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)
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K
i
]
where SWPNtR(Ki,T;Tn) (resp., SWPNtP(Ki,T;Tn)) is a price of a swaption receiver (resp., payer), struck at Ki, expiring at T and with tenor extending up to time Tn, and ΔKi=½(Ki+1−Ki−1) for i≧1, ΔK0=(K1−K0), ΔKM=(KM−KM−1), where K0 and KM are lowest and highest available strike prices traded in a market, and M+1 is a total number of traded swaptions expiring at time T and with tenor extending up to time Tn, where PVBPt(T1, . . . , Tn) is a price value of a basis point at time t of an interest rate swap starting at time T with fixed payment dates T1, . . . , Tn, and which is an impact of a one basis point change in a swap rate on a value of a fixed leg of the interest rate swap, and where Rt is the forward swap rate prevailing at time t;
and
displaying the interest rate swap volatility index associated with the underlying interest rate swaptions on a trading platform display device coupled with the trading platform.

93 more elements

A trading platform comprising:

a display device;
a memory storing a set of instructions for calculating an interest rate swap volatility index associated with an underlying interest rate swaption the interest rate swap volatility index reflecting a measure of expected future interest rate swap volatility;
and
a processor in communication with the display device and the memory, the processor configured to execute the set of instructions stored in the memory and to:
calculate the interest rate swap volatility index associated with the underlying interest rate swaption;
wherein the processor is configured to calculate the interest rate swap volatility index by aggregating prices of at-the-money and out-of-the-money receiver and payer interest rate swaptions according to the equation:
IRS
-
VI
n
BP
⁡
(
t
,
T
)
≡
1
T
-
t
⁢
2
PVBP
t
⁡
(
T
1
,
…
⁢
,
T
n
)
[
∑
i
:
K
i
<
R
t
⁢
SWPN
t
R
⁡
(
K
i
,
T
;
T
n
)
⁢
Δ
⁢
⁢
K
i
+
∑
i
:
K
i
≥
R
t
⁢
SWPN
t
P
⁡
(
K
i
,
T
;
T
n
)
⁢
Δ
⁢
⁢
K
i
]
where SWPNtR(Ki,T;Tn) (resp., SWPNtP(Ki,T;Tn)) is a price of a swaption receiver (resp., payer), struck at Ki, expiring at T and with tenor extending up to time Tn, and ΔKi=½(Ki+1−Ki−1) for i≧1, ΔK0=(K1−K0), ΔKM=(KM−KM−1), where K0 and KM are lowest and highest available strike prices traded in a market, and M+1 is a total number of traded swaptions expiring at time T and with tenor extending up to time Tn, where PVBPt(T1, . . . , Tn) is a price value of a basis point at time t of an interest rate swap starting at time T with fixed payment dates T1, . . . , Tn, and which is an impact of a one basis point change in a swap rate on a value of a fixed leg of the interest rate swap, and where Rt is the forward swap rate prevailing at time t;
and
display the interest rate swap volatility index associated with the underlying interest rate swaptions on the display device.

96 more elements

Dependencies are inferred from the claim text.

Facts

Application: 13/528,150Filed 20 Jun 2012 · us provisional application
Priority: 20 Jun 2011
Granted: 13 Aug 2013
Term ends: Not estimatedThe source records don’t support an estimate.

Classification3 codes

G06Q 40/04
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: trading; Exchange, e.g. stocks, commodities, derivatives or currency…
G06Q 40/06
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: asset management; Financial planning or analysis
G06Q
Information and communication technology [ict] specially adapted for administrative, commercial, financial, managerial