WO2019059839A1

WO2019059839A1 - Method for multivariate treasury hedging of cross-border electronic transfers

Info

Publication number: WO2019059839A1
Application number: PCT/SG2017/050471
Authority: WO
Inventors: Jun Yi Daniel CHIA
Original assignee: Call Levels Pte Ltd
Priority date: 2017-09-19
Filing date: 2017-09-19
Publication date: 2019-03-28
Also published as: SG11202002538YA

Abstract

A primary embodiment of the invention is a computer-implemented method for hedging of cross-border electronic transfers for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency; (c) calculating a settlement proposal for the transfer notifications; (d) sending the settlement proposal to the intended recipient for the transfer notifications; (e) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications; (f) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (g) upon fulfillment of the payout condition for the transfer notifications; and (h) closing the associated hedge strategy for the transfer notifications.

Description

METHOD FOR MULTIVARIATE TREASURY HEDGING OF CROSS- BORDER ELECTRONIC TRANSFERS

TECHNICAL FIELD

The present disclosure relates to processing of cross-border electronic transfers by computers and data processing systems. More particularly, the present disclosure relates to multivariate treasury hedging of cross-border electronic transfers as a computer-implemented method or as implemented by a data processing system.

BACKGROUND

For many merchants, such as travel companies selling transportation or lodging to customers, cross-border transactions are a daily part of their business. Global business- to-consumer cross border e-commerce flow is growing at over 27% annually and the flow is projected to reach USD $1 trillion by 2020.

A large expense for merchants conducting cross-border sales is the uncertainty of floating currency conversion rates, which typically puts at risk up to 15% of their revenue. These cross-border electronic transactions involve at least two currencies with floating currency conversion rates. The float between currencies can be compounded by a delay, sometimes of weeks or months, between the date of the customer purchase and the date of receipt of payment by the merchant. Even for transactions closing in one day, the currency rate fluctuations within a single day can potentially eliminate all profit from a transaction.

A conventional process for cross-border transactions is listed in the flowchart 1-00 of FIG. 1. In this example flowchart 1-00, an Indonesian (ID) customer purchases an item in IDR from a Singaporean (SG) merchant. The SG merchant receives the payment in SGD after the item has been received by the ID customer and two currency conversions have been performed. As listed in flowchart 1-00, the steps involved in this conventional cross-border electronic transfer of currency typically include: 1-01 SG merchant doing business primarily in SGD advertises an item online for sale in IDR, advertised price is calculated based on the present IDR/SGD currency conversion rate

1-02 ID customer purchases the item in IDR using a credit card

1-03 credit card transaction is submitted to the credit card's issuing bank and either approved or rejected by the issuing bank based on the ID customer's credit standing

1-04 upon approval of the transaction by the issuing bank, the purchase information is forwarded to a payment gateway / acquiring bank

1-05 the payment gateway / acquiring bank informs the merchant that the item's purchase has been approved

1-06 the issuing bank converts the IDR payment amount to USD

1-07 the issuing bank transfers the USD amount to the payment gateway / acquiring bank

1-08 the item is received by the ID customer

1-09 the payment gateway / acquiring bank converts the USD payment to the SGD and transfers SGD payment to the merchant's bank account

As illustrated in this 1-00 flowchart, there are two currency conversions. The ID customer pays in the initial currency of IDR. The first currency conversion is between IDR to USD. This first currency conversion may occur on the same day of the customer purchase or within a few business days of the purchase. The second currency conversion is between USD and SGD. The SG merchant is paid in the settlement currency of SGD.

The second currency conversion is often triggered by a condition that will occur at a time that is not known at the time of the purchase. The payment to the merchant, for instance, is often tied to a condition such as receipt of the item by the customer.

Uncertainty in the timing of receipt by the customer is a function of merchant inventory constraints, importation processing by customs officers and/or transportation logistics.

While the merchant is waiting for the payment condition to be triggered, the payment is held by the payment gateway / acquiring bank in the exchange currency. Exchange currencies, like USD, are selected by banks based on their lower susceptibility to sudden or drastic valuation changes as compared to other currencies. The USD is a commonly used exchange currency as is the EUR and CHF.

While the use of an exchange currency to hold the payment during the processing time of the transaction is a best practice for lowering risk of currency volatility (e.g., devaluation of the currency), it does not prevent fluctuations in the currency conversion rate between the exchange currency and the settlement currency. For instance, while the merchant is waiting for the customer to receive the purchased item, the settlement currency (such as SGD in the 1-00 example) can devalue against the exchange currency (USD in the 1-00 example), resulting in less-than-anticipated revenue to the merchant.

To address the risk of currency conversion rates volatility in cross-border transactions, the merchants can use various strategies to mitigate risks. Very large corporations have treasury departments that monitor aggregate customer revenue patterns and enter hedging strategies to offset currency conversion risks inherent to these patterns. Some of the larger merchants have the advantage of engaging in a high volume of transactions, such that a loss on one transaction can be offset by profits on other transactions. Other merchants require foreign customers to pay in the merchant's settlement currency, require immediate payment from the customer irrespective of delivery time and/or merely push the currency conversion risks to the merchant's vendors. But overall, the merchants must view the currency conversion rate volatility as a cost of doing business and as a result pass these costs, typically up to 15% of the product price, to customers. Especially for smaller merchants or merchants operating in markets with high currency volatility, the existing conventional cross-border electronic transfer architecture can benefit from an improved cross-border electronic transfer computer-implemented method or data processing system that is able to implement a method to reduce the inherent expense of the second currency conversion as well as provide more certainty for the amount of the final settlement amount paid to the merchant. With lower expenses and greater certainty, the merchant can provide items at a lower price to the customer, plan their business cash-flow with more certainty and lower the amount of on-hand cash needed to operate the business. SUMMARY

A primary embodiment of the invention is a computer-implemented method for hedging of cross-border electronic transfers for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency; (c) calculating a settlement proposal for the transfer notifications; (d) sending the settlement proposal to the intended recipient for the transfer notifications; (e) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications; (f) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (g) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; and (ii) transferring the settlement amount to the intended recipient; and (h) closing the associated hedge strategy for the transfer notifications. The settlement proposal includes a settlement amount in the settlement currency and a payout condition and the settlement amount includes a breakeven cost for the associated hedge strategy.

In a first alternative embodiment of the primary embodiment, the break-even cost for the associated hed e strate is calculated as follows: e_t, dY_tJ- - Δθ₍ fxcost

- Δθ_£ fxcost)

wherein:

6t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where 7 = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xsprdj is a cost of transaction of X,- in the exchange currency from a mid rate of

Xtj is a spot conversion rate between the exchange currency and the initial

currency at a chosen time (t) for the 7^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the

purchase currency for the the ^th instance of the plurality of transfer notifications at the chosen time (t).

In this first alternative embodiment of the primary embodiment, the settlement amount for the associated hedge strategy can be calculated as follows:

[t ₀, T] s.i. mm variance [k dS_t + Q^*dQ₍ - Δθ! fxcost ] m = k[S - S _spnj] + E[ k dS_t + Q^*dQ ₍ - AQ^*fxcosi ] + risk margin wherein:

m is the settlement amount for the transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

Si is a spot conversion rate between the exchange currency and the

settlement currency at the time t. In a second alternative embodiment of the primary embodiment, the settlement amount further includes: (a) a cost estimate for drawing the settlement amount from the treasury fund after currency conversion from the exchange currency to the settlement currency; and (b) a treasurer risk margin.

In a third alternative embodiment of the primary embodiment, each transfer notification is an aggregation of a plurality of separate transfer requests.

In a fourth alternative embodiment of the primary embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient is not known during the step of sending the settlement proposal to the intended recipient. In a fifth alternative embodiment of the primary embodiment, the first currency conversion from the initial currency to the exchange currency is performed by an issuing bank prior to the step of depositing the transfer amounts of the plurality of transfer notifications into the treasury fund. In a sixth alternative embodiment of the primary embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

In a seventh alternative embodiment of the primary embodiment, the step of receiving the plurality of purchase notifications includes concurrent receipt of each purchase notification by the intended recipient. In this seventh alternative embodiment of the primary embodiment: (a) the step of depositing the transfer amounts into the treasury fund can be executed after the payout condition is fulfilled by an associated product delivery confirmation; and (b) the step of closing the associated hedge strategy can be executed after the step of depositing the transfer amounts into the treasury fund and the step of transferring the settlement amount to the intended recipient. A second embodiment of the invention is a data processing system comprising at least one server configured to perform hedging of cross-border electronic transfers for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency; (c) calculating a settlement proposal for the transfer notifications; (d) sending the settlement proposal to the intended recipient for the transfer notifications; (e) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications; (f) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (g) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; and (ii) transferring the settlement amount to the intended recipient; and (h) closing the associated hedge strategy for the transfer notifications. The settlement proposal includes a settlement amount in the settlement currency and a payout condition and the settlement amount includes a break-even cost for the associated hedge strategy.

In a first alternative embodiment of the second embodiment the break-even cost for the associated hedge strategy is calculated as follows:

0_t, dY_tJ- - Δθ₍ fxcost) - Δθ_£ fxcost)

wherein:

6t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where 7 = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xtj is a spot conversion rate between the exchange currency and the initial

Ytj is a forward conversion rate between the exchange currency and the

m is the settlement amount for the transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

Si is a spot conversion rate between the exchange currency and the

settlement currency at the time t. In a second alternative embodiment of the second embodiment, the settlement amount further includes: (a) a cost estimate for drawing the settlement amount from the treasury fund after currency conversion from the exchange currency to the settlement currency; and (b) a treasurer risk margin.

In a third alternative embodiment of the second embodiment, each transfer notification is an aggregation of a plurality of separate transfer requests.

In a fourth alternative embodiment of the second embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient is not known during the step of sending the settlement proposal to the intended recipient. In a fifth alternative embodiment of the second embodiment, the first currency conversion from the initial currency to the exchange currency is performed by an issuing bank prior to the step of depositing the transfer amounts of the plurality of transfer notifications into the treasury fund. In a sixth alternative embodiment of the second embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

In a seventh alternative embodiment of the second embodiment, the step of receiving the plurality of purchase notifications includes concurrent receipt of each purchase notification by the intended recipient. In this seventh alternative embodiment of the primary embodiment: (a) the step of depositing the transfer amounts into the treasury fund can be executed after the payout condition is fulfilled by an associated product delivery confirmation; and (b) the step of closing the associated hedge strategy can be executed after the step of depositing the transfer amounts into the treasury fund and the step of transferring the settlement amount to the intended recipient. A third embodiment of the invention is a computer-implemented method for calculating a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications a break-even cost as follows:

e_t dY_tJ- - Δθ₍ fxcost]

f^c

^{dYw " A9t ¾: ost}}

(c) calculating for the transfer notifications a settlement amount in the settlement currency as follows: θ^* , t <≡ [t ₀, T] sJ. min variance [k dS₍ + 0, ¾ - ΔΘ* fxcost ] m— k[S - S _snr(t] + E[ k dS_t + &_f ^*dQ _f ^~ &9* fxcost ] + risk margin

wherein:

6_t is a minimum variance hedge ratio;

/) is the transfer amount for the ^th instance of the plurality of transfer

notifications;

j is a ^th instance of the plurality of transfer notifications, where j = 1,

n;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

St . Si is a spot conversion rate between the exchange currency and the settlement currency at a chosen time (t); and

Xt_j is a spot conversion rate between the exchange currency and the initial currency at the chosen time (t) for the ^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the purchase currency for the the ^th instance of the plurality of transfer notifications at the chosen time (t);

(d) preparing a settlement proposal for the transfer notifications that includes the settlement amount in the settlement currency and a payout condition; (e) sending the settlement proposal to the intended recipient for the transfer notifications; and (f) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications.

In a first alternative embodiment of the third embodiment, the settlement amount is adjusted by an effective pricing ratio equal to:

wherein

Ε(σ Si) is a spot price volatility between the exchange currency and the

settlement currency at the chosen time (t);

Ε(σ _Xt) is a spot price volatility between the exchange currency and the

initial currency at the chosen time (t); and

E(w) is a maximum number of the payment notifications in the initial currency for each subset of payment notifications.

In a second alternative embodiment of the third embodiment, further includes a step of batching the transfer notifications into at least two subsets of transfer notifications. The subsets can be batched pursuant to at least one of: (a) the initial currency of each transfer notification; (b) the settlement currency of each transfer notification; and (c) the intended recipient of each transfer notification. The subsets can also be batched pursuant to a temporal proximity of the notification timestamps to a time window and the chosen time can be selected from the group consisting of: (i) a first time within the time window; and (ii) a financial industry standard cut-off time in close temporal proximity to the time window.

In a third alternative embodiment of the third embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

A fourth alternative embodiment of the third embodiment further comprises the steps of: (a) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (b) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; (ii) transferring the settlement amount to the intended recipient; and (c)closing the associated hedge strategy for the transfer notifications.

In this fourth alternative embodiment of the third embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient may not be known during the step of sending the settlement proposal to the intended recipient.

In this fourth alternative embodiment of the third embodiment: (a) the step of receiving the payment notifications can be performed by an order management system (OMS) via an OMS API; and (b) the OMS API can be accessible by at least one of a plurality of banks and a plurality of merchants. In this fourth alternative embodiment of the third embodiment: (a) the payment notifications can be stored in an order queue server (OQS); and (b) the payment notifications can be processed by a cash transactions engine (CTE). A fourth embodiment of the invention is a data processing system comprising at least one server configured to perform a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications a break-even cost as follows:

0_t, dY_tJ- - Δθ₍ fxcost) , - Δθ_£ fxcost]

(c) calculating for the transfer notifications a settlement amount in the settlement currency as follows:

[t ₀, T] sJ. min variance [k dS_f + §_t ^*dQ_f - ΔΘ fxcost ] m = k[S _fQ - S _s„_r(J + E[ k dS_t + §)dQ _t - AQ* fxcost ] + risk margin

wherein:

6_t is a minimum variance hedge ratio;

/) is the transfer amount for the ^th instance of the plurality of transfer

notifications;

j is a ^th instance of the plurality of transfer notifications, where 7 = 1,

n;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications; is a forward conversion rate between the exchange currency and the settlement currency at the time t.

is a cost of transaction of S in the exchange currency from a mid rate of

is a spot conversion rate between the exchange currency and the settlement currency at a chosen time (t); and

Xt,j is a spot conversion rate between the exchange currency and the initial currency at the chosen time (t) for the ^th instance of the plurality of transfer notifications; and

In a first alternative embodiment of the fourth embodiment, the settlement amount is adjusted by an effective pricing ratio equal to:

wherein

Ε(σ Si) is a spot price volatility between the exchange currency and the

settlement currency at the chosen time (t);

Ε(σ _Xt) is a spot price volatility between the exchange currency and the

initial currency at the chosen time (t); and E(w) is a maximum number of the payment notifications in the initial currency for each subset of payment notifications.

A second alternative embodiment of the fourth embodiment further includes a step of batching the transfer notifications into at least two subsets of transfer notifications. The subsets can be batched pursuant to at least one of: (a) the initial currency of each transfer notification; (b) the settlement currency of each transfer notification; and (c) the intended recipient of each transfer notification. The subsets can also be batched pursuant to a temporal proximity of the notification timestamps to a time window and the chosen time can be selected from the group consisting of: (i) a first time within the time window; and (ii) a financial industry standard cut-off time in close temporal proximity to the time window.

In a third alternative embodiment of the fourth embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

A fourth alternative embodiment of the fourth embodiment further comprises the steps of: (a) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (b) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; (ii) transferring the settlement amount to the intended recipient; and (c) closing the associated hedge strategy for the transfer notifications.

In this fourth alternative embodiment of the fourth embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient may not be known during the step of sending the settlement proposal to the intended recipient. In this fourth alternative embodiment of the fourth embodiment: (a) the step of receiving the payment notifications can be performed by an order management system (OMS) via an OMS API; and (b) the OMS API can be accessible by at least one of a plurality of banks and a plurality of merchants.

In this fourth alternative embodiment of the fourth embodiment: (a) the payment notifications can be stored in an order queue server (OQS); and (b) the payment notifications can be processed by a cash transactions engine (CTE).

/ / / BRIEF DESCRIPTION OF THE DRAWINGS

Embodiments of the present disclosure are described herein with reference to the drawings in which: FIG. 1 is a flowchart of the steps involved in a conventional cross-border electronic transfer of currency.

FIG. 2 is a chart demonstrating the financial impact of currency conversion rate volatility in example cross-border electronic transfers.

FIG. 3 is a flowchart of the steps involved in an embodiment of the invention for hedging of cross-border electronic transfers for a plurality of transfer notifications.

FIG. 4 is a flowchart of the steps involved in an embodiment of the invention for calculating a multivariate hedging strategy for a plurality of transfer notifications.

FIG. 5A is a histogram of a simulated profit and loss (P&L) applying the conventional method for cross-border electronic transfers to a simulation data set. FIG. 5B is a histogram of the simulated P&L applying an embodiment of the invention to the simulation data set.

FIG. 6A is a table summarizing the simulated P&L statistics applying the conventional method for cross-border electronic transfers to the simulation data set.

FIG. 6B is a table summarizing the simulated P&L statistics applying an embodiment of the invention to the simulation data set.

FIG. 7 is a graph comparing volatility spread from applying the conventional method for cross-border electronic transfers to the simulation data set to volatility spread from applying an embodiment of the invention to the simulation data set. DETAILED DESCRIPTION

In the following detailed description, reference is made to the accompanying drawings, which form a part hereof. The illustrative embodiments described in the detailed description, drawings and claims are not meant to be limiting. Other embodiments can be utilized, and other changes can be made, without departing from the spirit or scope of the subject matter presented herein. Unless specified otherwise, the terms "comprising," "comprise," "including" and "include" used herein, and grammatical variants thereof, are intended to represent "open" or "inclusive" language such that they include recited elements but also permit inclusion of additional, un-recited elements.

FIG. 2 is a chart 2-00 illustrates the financial impact of currency conversion rate volatility in example cross-border electronic transfers. At the time of customer purchase the IDR/USD currency conversion rate is 10,000, the SGD/USD currency conversion rate is 1.5 and the item for sale is priced at IDR 666,666 for simplicity in the calculations. Example-A, Example-B, Example-C and Example-D represent example volatility of the currency conversion rates. The second to rightmost column indicates the merchant payout under the conventional method, the rightmost column indicates the merchant payout under an embodiment of the invention. While the merchant payout under the conventional method can change substantially with the fortunes of the currency conversion rates, the merchant payout under an embodiment of the invention is the same for any change to the currency conversion rates during the transaction. Note that the Example-A is very unlikely to occur as in practice the currency conversion rates are not static, especially for transactions not closed on the same business day. In this 2-00 example there is an exemplary premium of USD 2 corresponding to the use of an embodiment of the invention. The USD 2 premium finances the information technology equipment, software, staffing, transaction fees, company profit and the costs associated with entering and exiting hedging positions. Apart from the net savings from use of the embodiment of the invention, the merchants gain certainty regarding upcoming settlement amounts. As a result, the merchants can better plan their upcoming cash flow and provide their products to the customer at a lower price. The use of an embodiment of the invention can effectively take the currency conversion volatility risk off of the merchants' financial balance sheet and allow the merchants to focus on the merchants' core business.

FIG. 3 is a flowchart 3-00 of the steps involved in an embodiment of the invention for hedging of cross-border electronic transfers for a plurality of transfer notifications. The steps include:

3-01 receiving the transfer notifications

3-02 calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency

3-03 calculating a settlement proposal for the transfer notifications

3-04 sending the settlement proposal to the intended recipient for the transfer notifications

3-05 upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications

3-06 depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications

3-07 upon fulfillment of the payout condition for the transfer notifications, drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency

3-08 transferring the settlement amount to the intended recipient

3-09 closing the associated hedge strategy for the transfer notifications

The USD 2 premium price in the 2-00 example is for discussion purposes only. As illustrated in step 3-03, the settlement proposal is calculated for each transfer notification. The terms of the settlement proposal can thus, for each transfer notification or subset of transfer notifications can be adjusted to account for spot price volatility. A more volatile currency conversion market or currency conversion trends will result in a higher premium price. The premium price may become so high that the intended recipient of the settlement proposal may reject the settlement proposal and perhaps not even authorize the transaction. Because the invention is operated in real- time or near real-time, the merchants receive up to date information about the current premiums, and this information can be used by the merchants to more effectively price their products for the customer. The issuing banks and payment gateway / acquiring banks benefit because the expectations of the merchants and their customers are set more accurately, leading to fewer complaints and less loss of business due to dissatisfaction with the banking service. While embodiments of the invention could be used by a bank, the banks are likely to outsource these hedging responsibilities to the equipment and software run by a third party hedge partner. The hedge partner takes the risk of loss for the first currency conversion in step 3-06 as well as the risk of loss for the second currency conversion in step 3-07. The risk from the first currency conversion is less than the risk of the second currency conversion. The the first currency conversion can occur nearly concurrently with the initiation of the associated hedge strategy for the transfer notification. Thus due to the speed inherent to the automated execution of an embodiment of the invention, the risk from the first currency conversion is minimized.

The larger risk for the hedge partner is the second currency conversion, because this second currency conversion in step 3-07 is done days, weeks or months after the receipt of the transfer notification in step 3-01, in which time the settlement currency conversion rate can fall in relation to the exchange currency. The risks inherent to the second currency conversion are offset by the step 3-02 of calculating an associated hedge strategy and then initiating this associated hedge strategy for the transfer notification in step 3-05. The associated hedge strategy is only ended in step 3-09 concurrently or nearly concurrently with the transferring of the settlement amount to the intended recipient in step 3-08.

Another embodiment of the invention, is represented in the flowchart 4-00 of FIG. 4 which lists the steps involved for calculating a multivariate hedging strategy for a plurality of transfer notifications. The steps include: 4-01 receiving the transfer notifications

4-02 batching the transfer notifications into at least two subsets of transfer notifications

4-03 calculating for the transfer notifications a break-even cost

4-04 calculating for the transfer notifications a settlement amount in the settlement currency

4-05 preparing a settlement proposal for the transfer notifications that includes the settlement amount in the settlement currency and a payout condition

4-06 sending the settlement proposal to the intended recipient for the transfer notifications

4-07 upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications

This flowchart 4-00 demonstrates the ability in this embodiment to batch the transfer notifications into at least two subsets of transfer notifications in step 4-02. Batching is useful as, especially with the large number of transactions that can be concurrently managed by the embodiment of the invention, the subsets can be batched pursuant to at least one of: (a) the initial currency of each transfer notification; (b) the settlement currency of each transfer notification; and (c) the intended recipient of each transfer notification. The subsets can also be batched pursuant to a temporal proximity of the notification timestamps to a time window and the chosen time can be selected from the group consisting of: (i) a first time within the time window; and (ii) a financial industry standard cut-off time in close temporal proximity to the time window. Note that, while not illustrated in this flowchart 4-00, the plurality of transfer notifications can be received at a plurality of different times and include at least two initial currencies. a. Method for Cross-Border Electronic Transfer with Treasury Hedging

In more detail, a primary embodiment of the invention is a computer-implemented method for hedging of cross-border electronic transfers for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency; (c) calculating a settlement proposal for the transfer notifications; (d) sending the settlement proposal to the intended recipient for the transfer notifications; (e) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications; (f) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (g) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; and (ii) transferring the settlement amount to the intended recipient; and (h) closing the associated hedge strategy for the transfer notifications. The settlement proposal includes a settlement amount in the settlement currency and a payout condition and the settlement amount includes a break-even cost for the associated hedge strategy.

In a first alternative embodiment of the primary embodiment, the break-even cost for the associated hedge strategy is calculated as follows:

e_t, - Δθ_ε fxcost]

_;- - A9_t fxcost)

wherein:

6t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where 7 = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xtj is a spot conversion rate between the exchange currency and the initial

Ytj is a forward conversion rate between the exchange currency and the

m is the settlement amount for the transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

Si is a spot conversion rate between the exchange currency and the

0_t, dY_tJ- - Δθ₍ fxcost) - Δθ_£ fxcost)

wherein:

6t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where 7 = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xtj is a spot conversion rate between the exchange currency and the initial currency at a chosen time (t) for the 7^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the

[t ₀, T] s.i. mm variance [k S_t + 0j¾ - Δθ! fxcost ] m = k[S ₍₀ - S _iprd] + E[ k dS_t + §*dQ ₍ - fxcost ] + risk mar

wherein:

m is the settlement amount for the transfer notifications;

Qt. is a forward conversion rate between the exchange currency and the settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

is a spot conversion rate between the exchange currency and the settlement currency at the time t. In a second alternative embodiment of the second embodiment, the settlement amount further includes: (a) a cost estimate for drawing the settlement amount from the treasury fund after currency conversion from the exchange currency to the settlement currency; and (b) a treasurer risk margin. In a third alternative embodiment of the second embodiment, each transfer notification is an aggregation of a plurality of separate transfer requests.

In a fourth alternative embodiment of the second embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient is not known during the step of sending the settlement proposal to the intended recipient.

In a fifth alternative embodiment of the second embodiment, the first currency conversion from the initial currency to the exchange currency is performed by an issuing bank prior to the step of depositing the transfer amounts of the plurality of transfer notifications into the treasury fund.

In a sixth alternative embodiment of the second embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies. In a seventh alternative embodiment of the second embodiment, the step of receiving the plurality of purchase notifications includes concurrent receipt of each purchase notification by the intended recipient. In this seventh alternative embodiment of the primary embodiment: (a) the step of depositing the transfer amounts into the treasury fund can be executed after the payout condition is fulfilled by an associated product delivery confirmation; and (b) the step of closing the associated hedge strategy can be executed after the step of depositing the transfer amounts into the treasury fund and the step of transferring the settlement amount to the intended recipient. b. Multivariate Hedging for Multiple Orders and Multiple Currencies

A third embodiment of the invention is a computer-implemented method for calculating a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications a break-even cost as follows:

6_t <¾^■ - A9_t fxcost] k

^{" Δθί fxcost]}

[t ₀, T] s.i. min variance [k S_t + 0j¾ - Δθ! fxcost ] m = k[S - S _spnj] + E[ k dS_t + Q*dQ ₍ - AQ* fxcost ] + risk margi 0t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where 7 = 1, n;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

St is a spot conversion rate between the exchange currency and the

settlement currency at a chosen time (t); and

Xt_j is a spot conversion rate between the exchange currency and the initial currency at the chosen time (t) for the 7^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the purchase currency for the the ^th instance of the plurality of transfer notifications at the chosen time (t); (d) preparing a settlement proposal for the transfer notifications that includes the settlement amount in the settlement currency and a payout condition; (e) sending the settlement proposal to the intended recipient for the transfer notifications; and (f) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications. In a first alternative embodiment of the third embodiment, the settlement amount is adjusted by an effective pricing ratio equal to:

wherein

Ε(σ s,) is a spot price volatility between the exchange currency and the

settlement currency at the chosen time (t);

Ε(σ _ί) is a spot price volatility between the exchange currency and the

initial currency at the chosen time (t); and

In this fourth alternative embodiment of the third embodiment: (a) the step of receiving the payment notifications can be performed by an order management system (OMS) via an OMS API; and (b) the OMS API can be accessible by at least one of a plurality of banks and a plurality of merchants.

In this fourth alternative embodiment of the third embodiment: (a) the payment notifications can be stored in an order queue server (OQS); and (b) the payment notifications can be processed by a cash transactions engine (CTE).

A fourth embodiment of the invention is a data processing system comprising at least one server configured to perform a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of: (a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount; (b) calculating for the transfer notifications a break-even cost as follows:

6_t, " A9_t fxcost)

_;- - A9_t fxcost)

Θ^* , /≡ [t ₀, T] s.t. mtn variance [k dS_t + &_{ dQ_T - AQ*fxcost ] m = k[S - S _sm._(i] + E[ k dS_t + Q^*dQ _t - A _t ^*fxcost ] + risk margin

wherein:

6_t is a minimum variance hedge ratio;

/) is the transfer amount for the 7^th instance of the plurality of transfer

notifications;

7 is a 7^th instance of the plurality of transfer notifications, where j = 1,

n;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications;

Q_t, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

St is a spot conversion rate between the exchange currency and the

settlement currency at a chosen time (t); and

Xt_j is a spot conversion rate between the exchange currency and the initial

currency at the chosen time (t) for the ^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the

purchase currency for the the ^th instance of the plurality of transfer notifications at the chosen time (t);

wherein

Ε(σ Si) is a spot price volatility between the exchange currency and the

settlement currency at the chosen time (t);

Ε(σ _Xt) is a spot price volatility between the exchange currency and the

initial currency at the chosen time (t); and

In a third alternative embodiment of the fourth embodiment, the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies. A fourth alternative embodiment of the fourth embodiment further comprises the steps of: (a) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications; (b) upon fulfillment of the payout condition for the transfer notifications: (i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; (ii) transferring the settlement amount to the intended recipient; and (c) closing the associated hedge strategy for the transfer notifications. In this fourth alternative embodiment of the fourth embodiment: (a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and (b) an exact date for transferring the settlement amount to the intended recipient may not be known during the step of sending the settlement proposal to the intended recipient.

In this fourth alternative embodiment of the fourth embodiment: (a) the step of receiving the payment notifications can be performed by an order management system (OMS) via an OMS API; and (b) the OMS API can be accessible by at least one of a plurality of banks and a plurality of merchants.

c. Effectiveness of Invention as Demonstrated with Historic Data

To demonstrate the effectiveness of an embodiment of the invention, the below described simulation was run on historic currency conversion rates. This simulation demonstrated the financial benefit of an embodiment of the invention by calculating a hypothetical merchant's daily profit and loss (P&L) with the assistance of an embodiment of the invention and benchmarking it against a calculation of the merchant's P&L using just the conventional cross-border electronic transfer method.

In this simulation, the merchant has daily incoming order flows in IDR, MYR and PHP that are worth USD 1 million respectively. Five publicly traded currency conversion spot rates are used in this simulation (EUR/USD, AUD/USD, NZD/USD, USD/CAD and USD/SGD) to calculate the associated hedge strategy for hypothetical transfer notifications involving a second currency conversion of USD/IDR, USD/MYR and USD/PHP. While this simulation uses only five currency conversion (FX) rates for the associated hedge strategy, one should note that a wider range of FX assets can be included to further optimize the hedging portfolio. For the ease of notation, this simulation refers to EUR/USD, AUD/USD, NZD/USD, USD/CAD and USD/SGD as hedging assets, and USD/IDR, USD/MYR and USD/PHP as unhedged assets. Using historical data from 01 January 2016 to 31 May 2017, the simulation uses the daily closing price at 8:00 pm Singapore time for the hedging assets and unhedged assets to calculate the returns, covariance matrices, minimum variance hedge ratio and P&L. All calculations are performed by an Artificial Intelligence (AI) that has the ability to run the mathematical equations of an embodiment of the invention with large amounts of data.

The following are the definitions of the variables used in the simulation:

Let J = (X , X₂, -¾)'be the vector of unhedged assets (e.g.USD/IBR,USD MYR) at time t.

Let Y, = (Y_if Y 2- ··■· mY be the vector of hedging assets (e.g.EUR USD, AULVUSD) at time t. Let = (¾* _j. w w ;) ' be the vector of incoming orders (e.g. IDE... MYR) at time t.

Let 6 _f = (Θ _{l t} Θ ₂, 8 ₃, θ ₄)' be the vector of eiinimma variance hedge ratios at time t

The minimum variance hedge ratio is derived as:

After obtaining the hedge ratio, the hedging portfolio P&L can be determined. The hedging portfolio P&L is t e summatio of: the unhedged P&L ( Δ_Υ_÷ ): and the hedging P&L (Q ΑΫ^ )

Thus, the overall hedged portfolio P&L is P = ίί ΔΧ, ^■÷· § Δ Y_t .

The returns, covariance matrices, minimum variance hedge ratio in this illustration are calculated over a rolling 20 trading day period, to simulate a daily P&L over the period of the simulation. These daily P&L values enable the determination of the P&L' s volatility and standard deviation using standard techniques. Details of the P&L volatility are displayed in FIGs. 5A-5B, 6A-6B and 7.

As illustrated in the histogram 5A-00 of FIG. 5A, the distribution of one day FX loss for the conventional method for cross-border electronic transfer has a wider distribution, or higher volatility, compared to the one day FX loss for an embodiment of the invention as illustrated in the histogram 5B-00 of FIG. 5B. Table 6A-00 of FIG. 6A list P&L ranges from USD 69,464.01 to USD 38,430.77 for the conventional cross- border electronic transfer method. In comparison, for an embodiment of the invention, the P&L ranges listed in table 6B-00 of FIG. 6B range from USD 33,416.49 to USD 24,312.04. Applying the conventional method for cross-border electronic transfer, the merchant incurs a greater loss should the FX fluctuations work against the merchant. With use of an embodiment of the invention, the merchant's maximum loss is reduced by more than 50% (from USD 69,464.01 to USD 33,416.49). In terms of percentage, table 6A-00 demonstrates that the merchant is losing on average 2.32% of their daily revenue to FX fluctuations. Applying an embodiment of the invention, the merchant's daily loss is reduced to 1.11% as listed in Table 6B-00. Based on this simulation example, the merchant with USD 3 million worth of revenue would save USD 36,300 on a daily basis using an embodiment of the invention. The simulation demonstrates that there is a trade off between gain and loss when employing an embodiment of the invention. While the maximum gain is reduced, the maximum loss will also be reduced. As the merchants' major concern is the extreme FX fluctuations that are working against them, an embodiment of the invention can reduce the merchants' exposure to the volatile FX market.

On average, the industry FX daily accepted P&L volatility range is approximately 3% above and below the current price. This translates to a 47% annual risk in a merchant's revenue in FX fluctuations alone. A merchant's daily P&L volatility when applying the conventional cross-border electronic transfer in the simulation was found to be 0.36%, while the merchant's daily P&L volatility when applying an embodiment of the invention in the simulation was found to be 0.17%. This translates to a 2.7% annual risk in the merchant's revenue that is eliminated by application of an embodiment of the invention, a nearly twenty-fold reduction in FX risk for the merchant annually. This reduction in volatility is illustrated in the graph 7-00 of FIG. 7, which compares the volatility spread from applying the conventional method for cross-border electronic transfers to the simulation data set versus the volatility spread from applying an embodiment of the invention to the simulation data set as labeled in the legend of 7-00. Note that the merchant's revenue volatility range increases over time. The volatility follows the function: y = ± σ * ^'x where;

is the volatility;

σ is the daily P&L volatility; and

x is the number of days used in the calculation

From this equation it is evident that minimizing the daily FX risk is critical to minimizing the annual revenue risk to the merchant. The graph 7-00 demonstrates that an embodiment of the invention has a much smaller volatility spread compared to the conventional cross-border electronic transfer method. It should be noted that in this simulation, the merchant has incoming transfer notifications in only three different currencies (e.g., IDR, MYR and PFIP). If more currencies were involved, the merchant's P&L volatility would increase even further.

To summarize the results of the simulation, merchants who apply only the conventional cross-border electronic transfer method will be extremely vulnerable to currency conversion fluctuations, risking approximately 47% of their annual revenue. Through use of an embodiment of the invention, the merchant's risk can be reduced about twenty fold. It should be noted that the simulation is daily-based and the risk reduction through use of an embodiment of the invention would be significantly larger when applied over a longer time period.

While various aspects and embodiments have been disclosed herein, various other modifications and adaptations of the invention will be apparent to the person skilled in the art after reading the foregoing disclosure without departing from the spirit and scope of the invention and it is intended that all such modifications and adaptations come within the scope of the appended claims. The various aspects and embodiments disclosed herein are for purposes of illustration and are not intended to be limiting, with the true scope and spirit of the invention being indicated by the appended claims.

Claims

We Claim:

1. A computer-implemented method for hedging of cross-border electronic

transfers for a plurality of transfer notifications comprising the steps of:

(a) receiving the transfer notifications, each transfer notification including an intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount;

(b) calculating for the transfer notifications an associated hedge strategy to offset a possible future variation in a conversion rate between an exchange currency and the settlement currency;

(c) calculating a settlement proposal for the transfer notifications, wherein:

(i) the settlement proposal including a settlement amount in the settlement currency and a payout condition;

(ii) the settlement amount includes a break-even cost for the associated hedge strategy;

(d) sending the settlement proposal to the intended recipient for the transfer

notifications;

(e) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications;

(f) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications;

(g) upon fulfillment of the payout condition for the transfer notifications:

(i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency;

(ii) transferring the settlement amount to the intended recipient; and

(h) closing the associated hedge strategy for the transfer notifications.

2. The computer-implemented method of claim 1, wherein the break-even cost for the associated hedge strategy is calculated as follows:

a ( l \ ⁿ ( 1 \

i_j ί -— J dX_tj + 9_t ^ ( " ^~2 J dYy - A9_t / tcosi:}

1^J=1 ' dY_tj - AQt fxcost)

wherein:

is a minimum variance hedge ratio;

is the transfer amount for the ^th instance of the plurality of transfer

notifications;

J is a j instance of the plurality of transfer notifications, where j = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xt,j is a spot conversion rate between the exchange currency and the initial

currency at a chosen time (t) for the ^th instance of the plurality of transfer notifications; and

Ytj is a forward conversion rate between the exchange currency and the

3. The computer-implemented method of claim 2, wherein the settlement amount for the associated hedge strategy is calculated as follows:

, e [ ₀. Γ] s.t. min variance [k dS_t + ^dQ, - Δθ₍ fxcost ] m = k[S - S _sgni] + E k dS_t + ®_j ^*dQ _r - AQ* fxcost ] + risk margin wherein:

m is the settlement amount for the transfer notifications;

is a forward conversion rate between the exchange currency and the settlement currency at the time t.

is a cost of transaction of S in the exchange currency from a mid rate of

Si, ; and Si is a spot conversion rate between the exchange currency and the settlement currency at the time t.

4. The computer-implemented method of claim 1, wherein the settlement amount further includes:

(a) a cost estimate for drawing the settlement amount from the treasury fund after currency conversion from the exchange currency to the settlement currency; and

(b) a treasurer risk margin.

5. The computer-implemented method of claim 1, wherein each transfer notification is an aggregation of a plurality of separate transfer requests.

6. The computer-implemented method of claim 1, wherein:

(a) the payout condition may be fulfilled at any time after the step of receiving the acceptance from the intended recipient of the settlement proposal; and

(b) an exact date for transferring the settlement amount to the intended recipient is not known during the step of sending the settlement proposal to the intended recipient.

7. The computer-implemented method of claim 1, wherein the first currency conversion from the initial currency to the exchange currency is performed by an issuing bank prior to the step of depositing the transfer amounts of the plurality of transfer notifications into the treasury fund.

8. The computer-implemented method of claim 1, wherein the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

9. The computer-implemented method of claim 1, wherein the step of receiving the plurality of purchase notifications includes concurrent receipt of each purchase notification by the intended recipient.

10. The computer-implemented method of claim 9, wherein: (a) the step of depositing the transfer amounts into the treasury fund is executed after the payout condition is fulfilled by an associated product delivery confirmation; and

(b) the step of closing the associated hedge strategy is executed after the step of depositing the transfer amounts into the treasury fund and the step of transferring the settlement amount to the intended recipient.

11. A data processing system comprising at least one server configured to perform hedging of cross-border electronic transfers for a plurality of transfer notifications comprising the steps of:

(c) calculating a settlement proposal for the transfer notifications, wherein:

(d) sending the settlement proposal to the intended recipient for the transfer notifications;

(g) upon fulfillment of the payout condition for the transfer notifications:

(ii) transferring the settlement amount to the intended recipient; and

(h) closing the associated hedge strategy for the transfer notifications.

12. The data processing system of claim 11, wherein the break-even cost for the associated hedge strategy is calculated as follows:

0_t,

0_t is a minimum variance hedge ratio;

/) is the transfer amount for the ^th instance of the plurality of transfer

notifications;

j is a ^th instance of the plurality of transfer notifications, where j = 1,

n;

k is the break-even cost;

n is a total number of the plurality of transfer notifications;

Xtj is a spot conversion rate between the exchange currency and the initial

Ytj is a forward conversion rate between the exchange currency and the

13. The data processing system of claim 12, wherein the settlement amount for the associated hedge strategy is calculated as follows:

8* , t € [t ₀, T] sJ. min variance [k dS₍ + _t ^*dQ_t - A&₍ ^* fxcost ] m = k[S _fQ - S _s„_r(J + E[ k dS_t + §)dQ _t - AQ* fxco$t ] + risk margin wherein:

m is the settlement amount for the transfer notifications; Qt, is a forward conversion rate between the exchange currency and the settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

Si is a spot conversion rate between the exchange currency and the

settlement currency at the time t.

14. The data processing system of claim 11, wherein the settlement amount further includes:

(a) a cost estimate for drawing the settlement amount from the treasury fund after currency conversion from the exchange currency to the settlement currency; and (b) a treasurer risk margin.

15. The data processing system of claim 11, wherein each transfer notification is an aggregation of a plurality of separate transfer requests.

16. The data processing system of claim 11, wherein:

17. The computer-implemented method of claim 11, wherein the first currency conversion from the initial currency to the exchange currency is performed by an issuing bank prior to the step of depositing the transfer amounts of the plurality of transfer notifications into the treasury fund.

18. The data processing system of claim 11, wherein the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

19. The data processing system of claim 11, wherein the step of receiving the

plurality of purchase notifications includes concurrent receipt of each purchase

notification by the intended recipient.

20. The data processing system of claim 19, wherein:

(a) the step of depositing the transfer amounts into the treasury fund is executed after the payout condition is fulfilled by an associated product delivery confirmation;

and

21. A computer-implemented method for calculating a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of:

(a) receiving the transfer notifications, each transfer notification including an

intended recipient, a notification timestamp, an initial currency, a settlement currency and a transfer amount;

(b) calculating for the transfer notifications a break-even cost as follows:

dY_tJ- - Δθ₍ fxcost) , - Δθ_£ fxcost]

, e [ ₀. Γ] s.t. min variance [k dS_! + Q_t ^*dQ_f - Q* fxcost ] = k[S - S _sgni] + E[ k dS_{ + §_j ^*dQ _r - AQ* fxcost ] + risk margin wherein:

6_t is a minimum variance hedge ratio; /) is the transfer amount for the 7^th instance of the plurality of transfer notifications;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications;

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

St is a spot conversion rate between the exchange currency and the

settlement currency at a chosen time (t); and

Xsprd_j is a cost of transaction of X,- in the exchange currency from a mid rate of

(d) preparing a settlement proposal for the transfer notifications that includes the settlement amount in the settlement currency and a payout condition;

(e) sending the settlement proposal to the intended recipient for the transfer notifications; and

(f) upon receiving an acceptance from the intended recipient of the settlement proposal, initiating the associated hedge strategy for the transfer notifications.

22. The computer implemented method of claim 21, wherein the settlement amount is adjusted by an effective pricing ratio equal to:

E(w)

m E( _x) \ - E(o _{S (}) wherein

Ε(σ Si) is a spot price volatility between the exchange currency and the

settlement currency at the chosen time (t);

Ε(σ xt) is a spot price volatility between the exchange currency and the

initial currency at the chosen time (t); and

23. The computer-implemented method of claim 21, further including a step of batching the transfer notifications into at least two subsets of transfer notifications.

24. The computer-implemented method of claim 23, wherein the subsets are batched pursuant to at least one of:

(a) the initial currency of each transfer notification;

(b) the settlement currency of each transfer notification; and

(c) the intended recipient of each transfer notification.

25. The computer-implemented method of claim 23, wherein:

(a) the subsets are batched pursuant to a temporal proximity of the notification timestamps to a time window; and

(b) the chosen time is selected from the group consisting of:

(i) a first time within the time window; and

(ii) a financial industry standard cut-off time in close temporal proximity to the time window.

26. The computer-implemented method of claim 21, wherein the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

27. The computer-implemented method of claim 21, further comprising the steps of: (a) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications;

(b) upon fulfillment of the payout condition for the transfer notifications:

(i) drawing the settlement amount from the treasury fund after a second currency conversion from the exchange currency to the settlement currency; (ii) transferring the settlement amount to the intended recipient; and

(c) closing the associated hedge strategy for the transfer notifications.

28. The computer-implemented method of claim 27, wherein:

29. The computer-implemented method of claim 27, wherein:

(a) the step of receiving the payment notifications is performed by an order management system (OMS) via an OMS API; and

(b) the OMS API is accessible by at least one of a plurality of banks and a plurality of merchants.

30. The computer-implemented method of claim 27, wherein:

(a) the payment notifications are stored in an order queue server (OQS); and

(b) the payment notifications are processed by a cash transactions engine (CTE).

31. A data processing system comprising at least one server configured to perform a multivariate hedging strategy for a plurality of transfer notifications comprising the steps of:

(b) calculating for the transfer notifications a break-even cost as follows: 6_t, dY_tJ- - A9_t fxcost]

Θ* , /≡ [/ ₀, T] s.t. min variance [k dS_t + &_{ dQ_T - ΑΘ* fxcost ] m = k[S _m - S _sm._(i] + E[ k dS_f + Q^*dQ _{ - ^* fxcost ] + risk margin wherein:

6_t is a minimum variance hedge ratio;

/) is the transfer amount for the ^th instance of the plurality of transfer

notifications;

j is a ^th instance of the plurality of transfer notifications, where j = 1,

n;

k is the break-even cost;

m is the settlement amount for the transfer notifications;

n is a total number of the plurality of transfer notifications;

Qt, is a forward conversion rate between the exchange currency and the

settlement currency at the time t.

Ssprd is a cost of transaction of S in the exchange currency from a mid rate of

Si is a spot conversion rate between the exchange currency and the

settlement currency at a chosen time (t); and

Xt_j is a spot conversion rate between the exchange currency and the initial

currency at the chosen time (t) for the ^th instance of the plurality of transfer notifications; and Ytj is a forward conversion rate between the exchange currency and the purchase currency for the the ^th instance of the plurality of transfer notifications at the chosen time (t);

(e sending the settlement proposal to the intended recipient for the transfer notifications; and

32. The data processing system of claim 31, wherein the settlement amount is adjusted by an effective pricing ratio equal to:

wherein

Ε(σ s,) is a spot price volatility between the exchange currency and the settlement currency at the chosen time (t);

Ε(σ _Xt) is a spot price volatility between the exchange currency and the initial currency at the chosen time (t); and

33. The data processing system of claim 31, further including a step of batching the transfer notifications into at least two subsets of transfer notifications.

34. The data processing system of claim 33, wherein the subsets are batched pursuant to at least one of:

(a) the initial currency of each transfer notification;

(b) the settlement currency of each transfer notification; and

(c) the intended recipient of each transfer notification.

35. The data processing system of claim 33, wherein:

(b) the chosen time is selected from the group consisting of:

(i) a first time within the time window; and

36. The data processing system of claim 31, wherein the plurality of transfer notifications are received at a plurality of different times and include at least two initial currencies.

37. The data processing system of claim 31, further comprising the steps of:

(a) depositing the transfer amounts of the plurality of transfer notifications into a treasury fund after a first currency conversion from the initial currency to the exchange currency for the transfer notifications;

(b) upon fulfillment of the payout condition for the transfer notifications:

(ii) transferring the settlement amount to the intended recipient; and

(c) closing the associated hedge strategy for the transfer notifications.

38. The data processing system of claim 37, wherein:

39. The data processing system of claim 37, wherein:

(b) the OMS API is accessible by at least one of a plurality of banks and a plurality of merchants. The data processing system of claim 37, wherein:

the payment notifications are stored in an order queue server (OQS); and the payment notifications are processed by a cash transactions engine (CTE).