Valuation of derivative products

Abstract

Disclosed are a method, apparatus, and computer-readable medium for determining the value of a derivative product over nonconsecutive periods. The derivative product may be an interest rate swap product, which, when exchanged traded, normally is valued on a mark-to-market basis over consecutive periods. The product may be valued using swap value factors and settlement values according to the methodology disclosed herein.

1 . A method comprising:
 determining, by a processor, a first value calculation as a function of an initial trade price, a first settlement value, and a first swap value factor;   determining, by the processor, a second value calculation as a function of a next swap value factor and a consecutive pair of settlement values; and   determining, by the processor, a value of a financial product based on the first and second value calculations.   
     
     
         2 . The method of  claim 1 , wherein the first swap value factor is a sum of coupon value factors. 
     
     
         3 . A method according to  claim 2 , wherein each of the coupon value factors is calculated for a coupon expiration date as a product of daycount fraction and swap discount factor. 
     
     
         4 . The method of  claim 1 , wherein the determining of the value of the financial product comprises aggregating the first and second value calculations. 
     
     
         5 . The method of  claim 1 , wherein the first and second value calculations are part of a series of calculated valuations taken from a start of a period at which the financial product is onset to an end of the period. 
     
     
         6 . The method of  claim 1 , further comprising adjusting the consecutive pair of settlement values prior to determining the value of the financial product. 
     
     
         7 . The method of  claim 1 , further comprising determining a third value calculation from an offset trade price or from a final settlement value. 
     
     
         8 . The method of  claim 7 , wherein the determining of the value of the financial product is further based on the third value calculation. 
     
     
         9 . The method of  claim 1 , wherein the financial product is an interest rate swap. 
     
     
         10 . The method of  claim 8 , wherein the interest rate swap is a dollar-denominated product or a Euro-denominated product. 
     
     
         11 . An apparatus comprising:
 a memory unit storing computer executable instructions; and   a processing unit coupled to the memory unit and configured to execute the instructions to cause the apparatus at least to perform:
 determining a first value calculation as a function of an initial trade price, a first settlement value, and a first swap value factor; 
 determining a second value calculation as a function of a next swap value factor and a consecutive pair of settlement values; and 
 determining a value of a financial product based on the first and second value calculations. 
   
     
     
         12 . The apparatus of  claim 11 , wherein the determining of the value of the financial product comprises aggregating the first and second value calculations. 
     
     
         13 . The apparatus of  claim 11 , wherein the first and second value calculations are part of a series of calculated valuations taken from a start of a period at which the financial product is onset to an end of the period. 
     
     
         14 . The apparatus of  claim 11 , wherein the instructions, when executed, cause the apparatus to adjust the consecutive pair of settlement values prior to determining the value of the financial product. 
     
     
         15 . The apparatus of  claim 11 , wherein the instructions, when executed, cause the apparatus to determine a third value calculation from an offset trade price or from a final settlement value, and wherein the determining of the value of the financial product is further based on the third value calculation. 
     
     
         16 . A non-transitory computer readable medium storing computer executable instructions that, when executed, cause an apparatus at least to perform:
 determining a first value calculation as a function of an initial trade price, a first settlement value, and a first swap value factor;   determining a second value calculation as a function of a next swap value factor and a consecutive pair of settlement values; and   determining a value of a financial product based on the first and second value calculations.   
     
     
         17 . The computer readable medium of  claim 16 , wherein the determining of the value of the financial product comprises aggregating the first and second value calculations. 
     
     
         18 . The computer readable medium of  claim 16 , wherein the first and second value calculations are part of a series of calculated valuations taken from a start of a period at which the financial product is onset to an end of the period. 
     
     
         19 . The computer readable medium of  claim 16 , wherein the instructions, when executed, cause the apparatus to adjust the consecutive pair of settlement values prior to determining the value of the financial product. 
     
     
         20 . The computer readable medium of  claim 16 , wherein the instructions, when executed, cause the apparatus to determine a third value calculation from an offset trade price or from a final settlement value, and wherein the determining of the value of the financial product is further based on the third value calculation.