NL1002790C1 - Financial instrument based on forecasts of races, opinion poll results, etc. - allows buyers and sellers of opinions to invest fixed sums with predictable winning amounts - Google Patents

Abstract

The buyers and sellers make contracts to pay or receive fixed sums in the event that a prediction is correct. Such predictions can be of the winner of an election, horse race, etc. It can also be based on the results of a future opinion poll. The event must have one or more possible correct results from a limited field, e.g. "which two objects from a selection of seven is considered the most important?". The payout will be the sum invested times a ratio. The ratio can be decided on a pari-mutual basis or by an auction process.

Description

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Financial instrument with limited loss and profit and associated pricing system

The invention relates to a financial instrument with which opinions can be measured with limited loss and profit and to an auction system based on this instrument.

5 In futures markets of shares, currencies and goods, opinions can be expressed on the price development of a stock index, commodity index or currency using future and / or option contracts. On the expiry date of such a contract, the price is determined and settled with the buyer and seller of the contract. The rate on the expiration date can be any value. The upper limit 10 in particular is unlimited, so that the maximum profit and the maximum loss are unlimited.

A new financial instrument, called optinie, limits the maximum loss and the maximum profit. The concept of opinion space is used in the description of options. This space can be limited or unlimited. In the case of a limited opinion space, an opinion is asked about a finite number of possible outcomes. Examples: 15 which of the 2 candidates wins the presidential election (room 2), which of the 8 horses finishes third in this race (room 8), which 2 of the 7 topics mentioned are the most important (room 7).

An unlimited opinion space has an unlimited number of possible outcomes. An unlimited opinion space is made limited by dividing the space into a finite number of subjects / classes, such that one or more of the subjects / classes becomes unlimited. E.g. if the opinion space of the AEX index is divided into 9 classes, these will become, for example: less than 485, 485-489.99,490-494.99,495-499.99,500-504.99,505-509.99,510-514.99,515-519.99 , greater than 520.

The class, in which the price of the opinion ends on the expiry date, is called "winning 25 class".

There are 2 types of optinies: optiniekoop and optiniekoop. An optinization is a contract regarding the purchase of an opinion. It entitles the owner of this option, if the winning class is stated on the contract, to an amount equal to the stake multiplied by the price for this class. The deposit is always withheld. 30 An option sale is a contract concerning the sale of an opinion. It obliges the owner of this option, if the winning class was stated on the contract, to pay an amount equal to the stake multiplied by the price 10 0 2 7 9 0 -2- for this class. The deposit is always paid out.

An optinie contract has 5 elements: the subject of the opinion poll with expiry date and time; buy or sell; the class; 5 - the stake. This can be money or an amount; the price.

For the prize, the higher the price for a class, the lower the probability that this class will be the "winning class". The price is a ratio.

In an optin purchase contract, the maximum loss is the stake and the maximum profit is the product of stake and price minus the stake. In an option sale contract, the maximum loss is the product of stake and price minus the stake. The values of investment and price are limited. As a result, the maximum values of loss and profit of option contracts are limited and known at the conclusion of the contract.

The winning class can be determined in 2 ways: external and internal. With an internal provision, this follows from the concluded option contracts. In an external provision it is separate from these contracts: eg an election result.

A poll can have one or more winning classes. E.g. which 2 of the mentioned 6 politicians are most popular? Opinion Room 6, "winning classes" 2. If an optin purchase contract has been concluded, stating one of the "winning classes", 20 the product of stake and prize will be paid, as indicated in the contract, etc.

The deposit of an option contract is optional. Any value is possible. The unit of the deposit is also free. This will usually be a currency. Another example of the unity of the stake is a number of points. Those who appear to have achieved the highest number of points by the expiration date will receive a bonus. The highest number of points is reached by optimally expressing the opinion of the market on a subject.

A bet made with a bookmaker is a special case of option purchase contracts. These bets are limited to the case with limited opinion space, one winning class, the number of values of the stake is limited and the unit of the stake is money. This is indicated in the table below. The invention thus relates to all other option contracts.

10 0 2 7 9 0 -3-

Comparative overview of optinies versus bookmaker and options / futures:

Description Optinie Bookmaker Options / futures

Buy Verk. Buy Verk. Buy Verk.

Opinion space:

Bound + + + - - 5 Boundary + + - + +

Variable deposit: yes yes no - no no

Winning class:

Internal + + - - - - 10 External + + + - + + 1 win. class + + + - - -> 1 win. class + + - - 15 An option purchase contract indicates that the probability of the class named in the contract to become a winning class is the reciprocal value of the prize, or greater. An option sales contract puts this chance at the reciprocal value of the price, or less. So the application of optinie buy and optinie-sales contracts gives a more accurate determination of the probability and thus a better opinion formation than only purchase contracts.

20 Optinies have a number of advantages over future and option contracts: * limited maximum profit and loss.

* cheaper: because the losses can not rise unlimited, one does not have to insure or. it is not necessary to monitor whether the financial obligations of the future or option contract can be met on the expiry date.

25 * freedom of choice of deposit: the deposit is free of choice at an option; any amount can be entered or deposited. Future and option contracts are standard contracts.

* freedom of opinion space: in the case of an unlimited opinion space, in future and option contracts, an opinion is expressed on a one-sided and unlimited part of the opinion space. With options, a smaller and possibly limited part can be chosen.

* more clearly: the price of an option indicates the chance that a class will become a "winning 1002790 -4-class". In the case of futures and options, the opportunity is implicitly displayed.

* greater liquidity: a future or option contract is a contract between 2 parties, a buyer and a seller. An optime contract is a contract concluded with the market of buyers and sellers of options. This implies that it is easier to find the necessary counterparty (s) for a contract. It is even possible to have a market of 5 only option purchase or option sale contracts.

The second part of the patent application concerns the use of optinies in an opinion auction. This is an auction of options, such that from the auctioned and assigned options it is determined which average resp. common opinion is evident from the auction 10. All requested option purchase and sales contracts of one subject and one expiry date and time are collected. The weighted average of the price is determined for each class. This is called the "Bid Price".

Then the contracts are weighed against each other. This is the actual auction. The option purchase contracts with too high a price and option purchase contracts with too low a price have a small chance of allocation. The price of an option contract is determined by the market during the auction process. The weighted average price per class is determined from the awarded contracts. This is the "Did-price".

From the "Bid-prices" or "Did-prices" per class, an average opinion rate can be determined for opinions with unlimited opinion space.

20 An option auction is therefore a price-determining process. At the option auction, the deposit is variable, but the price is fixed. With a classic auction of goods, the price is variable, for example auction by auction or auction.

With the option auction, the dimension of the deposit does not change when paying or collecting. This is in contrast to the goods auction: A contractually stipulated good or service must be provided and one pays in cash.

With an auction per order book, there is one buyer resp. seller and there may be several sellers resp. buyers. An option auction involves several buyers and sellers simultaneously. It is even possible to have only buyers or sellers.

In an option auction, the organizer has no interest in price setting and does not influence the price. This is in contrast to stock exchanges where market makers do participate in pricing. This can give rise to a conflict of interest.

For clarification, the following comparison chart: 1002790 -5-

Description Fair Classic Bookmaker Optime auction auction

Variable deposit no no no yes

Variable price yes yes no no

Dim. underlying yes yes no no 5 value changes

Buy versus Sell l: n - 1: 1 n: m

Sales versus Buy η: 1 n: l - m: n

Pricing dependent. yes no yes no from market makers 10

The auction system therefore differs from other auctions by: * the price is constant, the investment variable (no bid or discount) * there are several buyers and sellers simultaneously * no goods or services are auctioned; the dimension of deposit and payout is 15 the same (money, points, etc.) 10 0 2 7 9 0

Claims (1)

-6- CONCLUS1E A financial instrument, called an optination, characterized in that an optinization contract obliges the owner to pay the product of investment and price, as the opinion contained in the contract on the outcome of the opinion on the expiry date of the 5 contract proves to be correct and that the owner gives entitlement to the investment, that an option purchase contract entitles the owner to the product of investment and price, if the opinion contained in the contract on the outcome of the opinion at the expiry date of the contract proves to be correct and that the owner is obliged to pay the deposit, characterized in that the unlimited opinion space is divided into a limited number of courses / classes, or the number of 'winning classes' is greater than one, or the size of the deposit is arbitrary, or the deposit has a dimension other than money as well as an instrument for determining the price of the option through an auction system, characterized in that at an auction simu More than one option purchase and sale contract can be auctioned, that an auction is possible from only buyers or sellers of options, that the price of the option determined at the auction is determined only by the buyers or sellers of option contracts, that at the auction the deposit of the option is variable but the price is not. 1002790