Method and System for Creating and Trading Derivative Investment Products Based on a Statistical Property Reflecting the Variance of an Underlying Asset

摘要

A system and method for creating a limited risk derivative based on a realized variance of an underlying equity is disclosed. In one implementation, a limited risk derivative product includes a capped value for a statistical property reflecting a variance of the underlying equity is calculated based on a pari-mutuel action. The capped value comprises a dynamic value and a cap. The dynamic value reflects an average volatility of prices returns of the underlying equity over a predefined period of time and the cap reflects a maximum value of the dynamic value. The limited risk derivative product additionally includes an average of a summation of each squared daily return of the underlying equity included in the value for the statistical property reflecting the variance of the underlying equity.

主权项

1. A limited risk derivative product based on a realized variance of an underlying equity, comprising:
a capped value for a statistical property reflecting the variance of the underlying equity, the capped value for the statistical property comprising a dynamic value and a cap, the dynamic value reflecting an average volatility of price returns of the underlying equity over a predefined time period and the cap reflecting a maximum value of the dynamic value; and an average of a summation of each squared daily return of the underlying equity included in the value for the statistical property reflecting the variance of the underlying equity; wherein the value of the statistical property is calculated according to the formula:RealizedVariance=AF×(∑i=1Na-1Ri2/(Ne-1))wherein:Ri=lnPi+1Pi,Pi is an initial value of the underlying equity used to calculate a daily return, Pi+1 is a final value of the underlying equity used to calculate the daily return, Ne is a number of expected underlying equity values needed to calculate daily returns during a variance calculation period, Na is an actual number of underlying equity values used to calculate daily returns during the variance calculation period; and AF is an annualization factor.