RU2250495C2 - Method for forming risks control contracts through computer system - Google Patents

Abstract

FIELD: computers, finance.

SUBSTANCE: method includes receiving data from user concerning certain active, minimal value of change, current percent stake without risk of non-payment, difference between prices of certain active during its quotation and required guarantee payment for certain active. Derivative for each variable of derivative calculation algorithm is set, variable price of realization with value of current price of certain active, variable price of execution with value of execution price. Difference between trade price of contract and final closing price is determined. Data about said difference is sent to user, which difference is subject to distribution. Difference between execution price and current price of certain active is determined and data is sent to user concerning said difference, being subject to distribution.

EFFECT: higher precision.

7 cl

Description

The present invention relates to transactions on options and other derivatives through a computer system for managing event risks, operational risks and market risk of jumps and, more particularly, relates to a method for formulating derivatives on measures of solar and geomagnetic activity or derivatives derived from them, including options and futures on the number of sunspots and the like (solar derivatives).

A derivative is an investment asset whose value is based on the value of the underlying asset. Thus, a derivative is, of course, a financial instrument that is derived from the future movement of something that cannot be predicted with certainty. Among derivatives there are futures contracts, forward contracts, options, swaps, swaps and others.

Derivatives are usually used by investors to increase portfolio returns or to protect against portfolio risks. Derivatives are also often used by banks, companies and organizations and the like to protect themselves from market risks in general. Derivatives are created for risk management, allowing such banks, companies, organizations and the like to divide their risks into several parts that can be transferred to other economic agents who want to take the risk for a one-time fee or stream of future payments.

In 1997, a new type of derivatives appeared - the weather derivative. A weather derivative is a contract whose value is based on fluctuations in temperature or accumulation of precipitation (for example, rain, showers, snowfalls, etc.).

Known, for example, is a computer-implemented method for evaluating weather-based financial instruments, which includes the following steps: obtaining information containing the start date and date of payment for the financial document, obtaining information containing an indication of the geographic region that will be covered by the financial document, and obtaining information containing weather conditions, depending on which the cost of the financial document will be calculated, obtaining information containing a risk-free interest rate, receiving -parameter (preceding) weather information concerning the weather conditions specified for said geographic region during a period between said start date and the date of said payment; obtaining future weather information regarding the specified weather conditions for the specified geographical region during the period between the specified start date and the specified payment date, as well as obtaining the value of the financial document using an assessment model using the specified historical weather information, the specified future weather information and the specified risk-free rate percent (see US No. 6418417, G 06 F 17/60, 07/09/2002).

There is also a known method of generating risk management contracts through a computer system, which includes receiving signals from the user that contain data on a specific asset, data on the type of contract, data on the strike price ("strike") for a certain asset, data on the current price of a certain asset ("spot" "), the minimum value of the change (" tick "), the current interest rate without the risk of non-payment, the spread of the price of a certain asset during its quote and the required guarantee fee for a specific asset, task with use using an algorithm for calculating the value of a derivative, a derivative of each variable of an algorithm for calculating a derivative value, depending on the signals received with the corresponding value, a variable strike price ("strike") with the value of the current price ("spot") for a specific asset according to the signal, then using the derivative value calculation algorithm, setting a variable strike price ("strike") with a strike price according to the mentioned signals (RU No. 2176817, G 06 F 17/60, 10.12.01).

Although well-known types of derivatives, including weather derivatives, serve as good risk management tools for market and some other types of risks, however, there are not enough tools for operational risks, event risks (for example, device breakdown risks, terrorism and others) and those risks of market volatility jumps. , which are sometimes called the “risk of market leaps,” which are not easily and precisely hedged.

The objective of the present invention is to more easily and accurately hedge certain types of factors of operational risk, event risk and market jump risk, as well as creating the ability for companies to hedge these risks using invented tools, and speculators to trade these risks and make profit using a computer system.

This task is achieved by the fact that in the method of forming risk management contracts through a computer system, which includes receiving signals from the user containing data on a specific asset, data on the type of contract, data on the strike price ("strike") for a specific asset, data at the current price of a certain asset ("spot"), the minimum value of the change ("tick"), the current interest rate without the risk of non-payment, the spread in the price of a certain asset during its quote and the required guarantee fee for a certain asset, task using the derivative value calculation algorithm, the derivative of each variable of the derivative value calculation algorithm, depending on the signals received with the corresponding value, a variable strike price ("strike") with the current price value ("spot") for a specific asset at the signal data, after that, using the derivative cost calculation algorithm, setting a variable execution price ("strike") with the value of the execution price according to the data of the mentioned signals, as signals containing data on a given asset, receive signals containing data on measures of solar and geomagnetic activity or indicators derived from them, as signals containing data on the strike price ("strike") for a specific asset, receive signals containing data on the level of execution ("strike" ) on measures of solar and geomagnetic activity or indicators derived from them, as signals containing data on the current price of a certain asset ("spot"), receive signals containing data on the current level ("spot") of measures of solar and geomagnes of active activity or indicators derived from them, as signals containing data on the minimum change value ("tick"), signals containing data on the minimum change value ("tick") of measures of solar and geomagnetic activity or derivatives derived from them, in the quality of signals containing data on the spread of the price of a particular asset during its quotation, receive signals containing data on the spread of measures of solar and geomagnetic activity or derivatives derived from them, determine the difference between the contract price and the final closing price and send the user a signal containing data about the specified difference to be distributed.

And also by the fact that, as part of the signals received from the user, they receive a signal containing data on the type of contract, on the volume of the contract, the date the contract started, the date (date) for execution, and additional conditions of the derivative.

And also by the fact that as a signal received from the user containing data on additional derivatives conditions, a signal is received containing data on the currency, geographical region, parties to the contract.

And also by the fact that as signals containing data on measures of solar and geomagnetic activity or derivatives derived from them, signals are obtained containing data on monthly average sunspot numbers.

And also by the fact that as signals containing data on the type of contract, signals are received containing data on the type of contract selected from the group including the option to sell (put option) or the option to buy (call option) or futures or forward or swap.

And also by the fact that as signals containing data on measures of solar and geomagnetic activity or derivatives derived from them, signals are obtained containing data on the influence of astronomical and geophysical measures.

There are two grounds for the invented type of derivatives (risk management contracts for measures of solar and geomagnetic activity or derivatives derived from them, including futures, options, swaps for the number of sunspots and other similar solar derivatives).

First of all, there are some risk factors that depend on solar and geomagnetic activity, for example, heart attacks, human errors, breakdowns of electronic devices, etc.

Geomagnetic storms affect the course of a number of diseases: diseases of the cardiovascular system (hypertension, angina pectoris, myocardial infarction), respiratory diseases (chronic non-specific lung diseases, tuberculosis); effect on the blood system, psycho-emotional state (syndrome of psycho-emotional stress); change of biorhythms.

During periods of helio-geo-magnetic disturbance, the aeroionic state in the surface air sharply changes, which leads to a change in the psychophysiological reactions of a person, to an increase in operator errors on “unfavorable days”. In the days of high solar activity complex equipment fails, the probability of errors of operators working on this equipment increases.

The analysis of accidents and traffic accidents confirms this - 5-6 times more often in the days of magnetic disturbances people die, 4-5 times more often than accidents in heating networks, gas pipelines, electricity and water supply lines, fires.

Disturbances of the geomagnetic field can disrupt the operation of satellite communications, power distribution systems, increase corrosion of oil pipelines, and complicate magnetic exploration of minerals.

These risk factors play an important role in many areas of business, for example, medicine and pharmaceuticals, aviation and other transport, industry and sales, insurance and reinsurance, etc.

Secondly, since A. Chizhevsky published his works in 1915, it is widely known that there is a correlation between the cycles of epidemics, economic cycles, the price movement of agricultural products, wars, revolutions and other incidents (for example, terrorist acts and etc.), on the one hand, and cycles of solar and geomagnetic activity, on the other hand.

Thus, the proposed solar derivatives can become a unique market instrument that can cover various factors of operational risks, event risks and market jump risks. Firms may try to hedge these risks through invented instruments, and speculators can trade these risks and make profits.

The closest analogue to the invented tools is weather derivatives, however, there is a significant difference in the risk factors covered. Weather derivatives are based on temperature fluctuations or accumulated precipitation and do not cover the above risk factors to the same extent as the proposed tools, based on measures of solar and geomagnetic activity or derivatives derived from them.

Solar derivatives can be used, for example, by a pharmaceutical company, as a barrier against growing demand, or by an insurance company to protect against claims by policyholders. However, unlike insurance policies, economic agents buying a derivative financial contract do not have to confirm any loss actually incurred. The buyer of a derivative, such as an option, must show that the measure of solar and geomagnetic activity or the indicator derived from such measures, mentioned in the contract, exceeded or was below the agreed level of performance ("strike"), i.e. The numerical value that defines the payment. On the contrary, the other side of the contract (i.e., the seller) will expect that the measure of solar and geomagnetic activity or the indicator derived from such measures, mentioned in the contract, will not be higher or lower than the level of performance specified in the contract ("strike").

Among modern measures of solar and geomagnetic activity, there are the oldest and most famous numbers of sunspots proposed by R. Wolf in 1851-1852, who opened 11-year cycles of solar activity. This measure of sunspot count can be used as an example of the underlying asset for derivatives.

One of the possible models of such a derivative (futures contract for the number of sunspots) is proposed here.

A futures or options contract or other derivatives for the number of sunspots can be based on the daily number of sunspots (DSN) and the average monthly number of sunspots (MASN). DSN is an indicator equivalent to the number of Wolf sunspots. MASN is the average number of spots for a given month.

Such contracts may be executed without delivery. Execution without delivery means that at the time of execution of each contract, the difference between the trading price of the futures contract and the final closing price based on MASN is calculated. This difference is to be distributed between buyers and sellers in the form of cash flows.

In order for solar derivatives to work on the open market, the parties must agree on the recording of measures of solar and geomagnetic activity or derivatives of them indicators (for example, the number of sunspots) for each day of the contract period. Therefore, organizations or government agencies, such as the World Data Center-A for Solar-Terrestrial Physics, for example, serve as custodians of records of the official number of sunspots or other measures of solar and geomagnetic activity for each day to avoid disagreements.

Companies in which solar and geomagnetic activity influence costs and profits should look for hedges of operational risks, event risks, and market jump risks through these contracts.

They include:

1) any companies and organizations for hedging operational risks, including terrorism, strikes, local wars, regional and political risks, risks of other events, etc .;

2) travel, aviation, industrial companies and other organizations in which changes in solar and geomagnetic activity can affect disasters due to operator errors, breakdowns of electronic devices, etc .;

3) medical and pharmaceutical companies, where supply and demand are highly correlated with changes in the number of sunspots;

4) agricultural producers, traders, food producers, fertilizer producers, where changes in solar and geomagnetic activity can affect crop yields, opportunities and prices;

5) trading companies, media companies, PR and advertising agencies and organizations, where the behavior of consumers is affected by a change in the number of sunspots;

6) insurance and reinsurance companies, pension funds to diversify portfolio risks.

The patented method can be implemented using the device described in patent RU 2176817, taken as a prototype.

An example implementation of a patented method

A variant of the invented solar derivative (for example, a futures contract for the number of sunspots) can be implemented as follows:

The parties agreed on the following conditions:

Parties to the contract "A" and "B".

Type of Contract: Futures Contract.

Underlying asset: Average monthly sunspot number (MASN) for January 2003.

Start date: October 1, 2002.

Date of execution: January 31, 2003.

The volume of the contract is $ 300,000.

The level of execution ("strike") is 110.0.

The minimum change value (tick) is 0.1.

At the settlement date, the difference between the trading price of the futures contract and the final closing price based on MASN is calculated according to the following algorithm:

Spot is MASN at the settlement date (or at the current date).

If "Spot" is greater than "Strike", then "A" receives {Contract volume multiplied by the difference between "Spot" and "Strike"};

If "Spot" is less than "Strike", then "B" receives {Contract volume multiplied by the difference between "Strike" and "Spot"};

If "Spot" is equal to "Strike", then the Parties shall not exchange payments.

For example, on January 31, 2003, the difference between the trading price of a futures contract and the final closing price based on MASN is calculated according to the following algorithm:

if the MASN is greater than 110.0: "A" receives {$ 300,000 times the difference between the MASN and 110.0};

if the MASN is less than 110.0: “B” receives {$ 300,000 times the difference between 110.0 and MASN};

if MASN is 110: Parties do not exchange money

For instance,

if the MASN is 111.0: Party "A" receives $ 300,000 from Party "B",

if the MASN is 90.0: Party "B" receives $ 6,000,000 from party "A".

As it will be clear to any specialist experienced in such tools, other scenarios are possible. For example, party “A” may pay an immediate price (for example, $ 1,000,000) to enter an option contract. So, in this scenario, if the MASN is below the strike level, party “A” loses the amount paid, but pays nothing more.

Situation.

On October 1, an American drug provider (supplying a pharmacy chain) was worried about the risks of losing revenue in January. Forecasters predicted an excess of the average level of sunspots in winter, which could mean more than usual demand for stimulating heart activity drugs, which this supplier would have to purchase at a potentially higher price.

Assumptions.

1. A drug supplier supplies 800 pharmacies.

2. The average annual demand of each pharmacy is 60,000 pieces of pacemaker drugs, of which approximately 10% is used in January.

3. Each unit of change in the average monthly number of sunspots corresponds to a five percent change in the expected demand for pacemaker medicines.

4. Forecasters generally predict that the number of sunspots in the coming January will be higher than the usual January level.

5. The drug supplier has a fixed selling price of $ 3.5 per piece of pacemaker.

6. The current (as of October 1) price of a pacemaker drug with delivery in January of $ 2.5 apiece.

7. Retrospective data show that if in January the number of sunspots is higher than average (average, for example, 110.00), then the potential price of a pacemaker may be $ 4.0 apiece in January.

Actions

As a more active sun is predicted in January, a drug provider may decide to sell sunspot futures to protect against potential losses due to increased demand and potentially high prices caused by high sunspots.

Calculation of the need for hedging.

800 (pharmacies), multiply by 60,000 (units per year), multiply by 10% (January share), multiply by 5% (specific change in volume per unit of change in the average monthly number of sunspots), we get 240,000 units (increase in demand for a pacemaker drug per unit of change monthly average number of sunspots).

$ 240,000 for $ 1.0 (change in the price of a pacemaker) will get $ 240,000.

A sunspot futures contract covers a risk of $ 3,000 per unit of change in the monthly average sunspot. Therefore, the number of contracts required to hedge potential losses of $ 240,000, divided by $ 3,000, will result in 80 contracts.

So, the drug provider is selling 80 January futures contracts for the number of sunspots. As a result, the supplier of medicines, selling futures, is protected from the growing demand for pacemaker drugs due to the higher average monthly number of sunspots compared to their usual January level.

Case 1 - The number of sunspots is higher than the average per unit (for example, 111.00 instead of 110.00)

Increased demand for a pacemaker drug of 240,000 units at $ 3.5 per unit will be $ 840,000.

Costs due to an increase in demand of 240,000 units at $ 4.0 per unit will be $ 960,000.

The loss will be ($ 120,000).

Lost profit (if the drugs were purchased at a price of S2 5 apiece) will be equal to ($ 120,000).

The profit realized on futures for the number of sunspots per unit of change in the number of sunspots is 80 contracts for $ 3,000, which will be $ 240,000.

The net result will be $ 0.0.

Case 2 - The number of sunspots is normal (for example, 110.00).

Futures for the number of sunspots are closed at the initial price without profit and losses are $ 0.0.

Implementation of a transaction on a solar derivative through a computer system (for example, futures on the average monthly number of sunspots) involves:

a) receiving by the central server (for example, the exchange) from the user (for example, the seller of the futures supplier of medicines) signals sent over the computer network to the central server and containing data:

about the type of contract, such as a futures contract,

about the underlying asset, for example, the average monthly number of sunspots (MASN) for January 2003,

about the start date, for example, October 1, 2002,

performance date, e.g. January 31, 2003,

about the contract size, for example $ 3000.00,

performance level ("strike"), for example 110.0,

the minimum change value ("tick"), for example 0.1,

Additional contract terms, such as payment currency, such as US dollars,

the actual MASN value at the settlement date ("spot"), for example 111.0;

b) determination of the difference between the trading price of a futures contract and the final closing price according to the algorithm:

if "Spot" is greater than "Strike", then "A" receives {Volume of contract "A" multiplied by the difference between "Spot" and "Strike"};

if "Spot" is less than "Strike", then "B" receives {Volume of contract "A" multiplied by the difference between "Strike" and "Spot"};

if "Spot" is equal to "Strike", then the Parties shall not exchange payments.

Such calculations are carried out on the central server on its existing processor.

For example, if the MASN is greater than 110.0, then the medication provider will receive {$ 300,000 times the difference between MASN and 110.0},

if the MASN is less than 110.0, then the exchange receives {$ 300,000, multiplied by the difference between 110.0 and MASN};

if the MASN is 110, then the parties do not exchange payments.

For example, MASN is 111.0, and the drug provider receives $ 300,000 per contract.

c) sending to the user from a central server (exchange) (for example, a medication provider) a signal containing data on the specified difference to be distributed between the seller (for example, the medication supplier) and the buyer (for example, the exchange).

By analogy with the device of the prototype, the device for implementing the patented invention contains means for receiving signals containing data on the type of contract, on the underlying asset, on the date of commencement of the contract, on the date of execution of the contract, on the volume of the contract, on the level of execution, on the minimum value of the change, additional terms of the contract, the actual value of MASN as of the execution date, storage medium for the means of receiving the indicated signals containing the specified data, and an algorithm for calculating the difference between the trading prices of the contract and the final valuable closure, and the means of outputting and sending a signal to the user containing data on the specified difference to be distributed between the seller (supplier) and the buyer (exchange).

Claims (6)

1. A method of generating risk management contracts through a computer system, which includes receiving signals from the user containing data on a specific asset, data on the type of contract, data on the strike price ("strike") for a specific asset, data on the current price of a certain asset ("spot" "), the minimum value of the change (" tick "), the current interest rate without the risk of non-payment, the spread of the price of a particular asset during its quote and the required guarantee fee for a specific asset, task using Derivative cost calculation algorithm, derivative of each variable of the derivative calculation algorithm, depending on the signals received with the corresponding value, variable execution price ("strike") with the current price value ("spot") for a specific asset according to the signal, then through the algorithm derivative cost calculation; assignment of a variable strike price ("strike") with a strike price value according to the data of said signals, characterized in that as signals containing data on a certain asset receive signals containing data on measures of solar and geomagnetic activity or indicators derived from them, as signals containing data on the strike price ("strike") for a specific asset, receive signals containing data on the performance level ("strike") on measures of solar and geomagnetic activity or indicators derived from them, as signals containing data on the current price of a certain asset ("spot"), receive signals containing data on the current level ("spot") of measures of solar and geomagnetic activity and and indicators derived from them, as signals containing data on the minimum value of the change ("tick"), receive signals containing data on the minimum value of the change ("tick") of measures of solar and geomagnetic activity or derivatives derived from them, as signals containing data on the spread of the price of a particular asset during its quotation, receive signals containing data on the spread of measures of solar and geomagnetic activity or derivatives derived from them, determine the difference between the trading price of the cont Act and final closing price and send the user a signal containing data about the said difference to be dispensed, determine the difference between the exercise price of "strike" and the current price "spot" the particular asset and sends a signal to the user that contains information about said difference to be dispensed. 2. The method according to claim 1, characterized in that, as part of the signals received from the user, a signal is received containing data on the type of contract, on the volume of the contract, the date the contract started, the date (date) for execution, and additional conditions of the derivative. 3. The method according to claim 2, characterized in that as a signal received from a user containing data on additional derivative conditions, a signal is received containing data on currency, geographical region, parties to the contract. 4. The method according to claim 1, characterized in that as signals containing data on measures of solar and geomagnetic activity or derivatives derived from them, signals are obtained containing data on monthly average sunspot numbers. 5. The method according to claim 2, characterized in that as signals containing data on the type of contract, receive signals containing data on the type of contract selected from the group including the option to sell (option "put"), or the option to purchase right (call option), or futures, or forward, or swap. 6. The method according to claim 1, characterized in that as signals containing data on measures of solar and geomagnetic activity or derived indicators, receive signals containing data on the influence of astronomical and geophysical measures.