US2017200226A1PendingUtilityA1
Methods and systems for creating an interest rate swap volatility index and trading derivative products based thereon
Assignee: Chicago Board Options Exchange IncorporatedPriority: Jun 20, 2011Filed: Aug 22, 2016Published: Jul 13, 2017
Est. expiryJun 20, 2031(~4.9 yrs left)· nominal 20-yr term from priority
G06Q 40/06G06Q 40/04
52
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Claims
Abstract
Systems and methods for creating and disseminating an interest rate swap volatility index based on an underlying interest rate swaption, and for creating and trading derivative investment products based on the interest rate swap volatility index, are disclosed. In one aspect, an interest rate swap volatility index based on an underlying interest rate swaption is calculated. The interest rate swap volatility index may be accessed by a processor of a trading platform and a standardized, exchange traded derivative may be created based on the calculated interest rate swap volatility index. Information associated with the interest rate swap volatility index derivative may then be transmitted for display.
Claims
exact text as granted — not AI-modified1 . A computer-implemented method of calculating an interest rate swap volatility index, the method comprising:
with a processor in a trading platform:
calculating an interest rate swap volatility index associated with at least one underlying interest rate swaption;
wherein the interest rate swap volatility index is calculated according to the equation:
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where SWPN t R (K i ,T;T n )′ (resp., SWPN t P (K i ,T;T n )′) is equal to SWPN t R (K i ,T;T)/PVBP t (T 1 , . . . , T n ) (resp.,
SWPN
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where SWPN t R (K i ,T;T n ) (resp., SWPN t P (K i ,T;T n )) is a price of a swaption receiver (resp., payer), struck at Ki, expiring at T and with tenor extending up to time T n , and ΔK i =1/2(K i+1 −K i−1 ) for i≧1, ΔK 0 =(K 1 −K 0 ), ΔK M =(K M −K M−1 ), where K 0 and K M are lowest and highest available strike prices traded in a market, and M+1 is a total number of traded swaptions expiring at time T and with tenor extending up to time Tn, where SWPN t R (K i ,T;T n )′ and SWPN t P (K i ,T;T n )′ are calculated using quoted implied volatilities of the at least one underlying interest rate swaption in Black's formula, and where PVBPt (T 1 , . . . , T n ) is a price value of a basis point at time t of an interest rate swap starting at time T with fixed payment dates T 1 , . . . , T n , which is an impact of a one basis point change in a swap rate on a value of a fixed leg of the interest rate swap;
displaying the interest rate swap volatility index associated with the underlying interest rate swaption on a trading platform display device coupled with the trading platform;
creating a standardized exchange-traded derivative instrument based on the interest rate swap volatility index; and
transmitting information for display associated with the standardized exchange traded derivative instrument, the information comprising a settlement price of the derivative instrument.
2 . The method of claim 1 , wherein calculating the interest rate swap volatility index comprises the processor aggregating prices of at-the-money and out-of-the-money receiver and payer interest rate swaptions.
3 . The method of claim 1 , wherein calculating the interest rate swap volatility index comprises the processor aggregating implied volatilities of at-the-money and out-of-the-money receiver and payer interest rate swaptions.
4 . The method of claim 2 , wherein calculating the interest rate swap volatility index further comprises the processor aggregating the prices in a single equation that is independent of any option pricing model.
5 . The method of claim 3 , wherein calculating the interest rate swap volatility index further comprises the processor converting the implied volatilities to prices and aggregating the prices in a single equation that is independent of any option pricing model.
6 . The method of claim 4 , wherein the processor reduces a relationship between prices of the underlying interest rate swaptions and their corresponding strikes into a single measure of volatility for each maturity-tenor combination of the underlying interest rate swaptions.
7 . The method of claim 5 , wherein the processor reduces a relationship between implied volatilities of the underlying interest rate swaptions and their corresponding strikes into a single measure of volatility for each maturity-tenor combination of the underlying interest rate swaptions.
8 .- 11 . (canceled)
12 . The method of claim 1 , further comprising:
transmitting the interest rate swap volatility index associated with the underlying interest rate swaption over at least one electronic dissemination network.
13 . (canceled)
14 . The method of claim 1 , wherein transmitting information associated with the derivative instrument based on the interest rate swap volatility index comprises transmitting a settlement price of the derivative instrument.
15 . The trading platform of claim 1 , wherein transmitting information associated with the derivative instrument based on the interest rate swap volatility index comprises transmitting a bid associated the derivative instrument.
16 . The trading platform of claim 1 , wherein transmitting information associated with the derivative instrument based on the interest rate swap volatility index comprises transmitting an offer associated the derivative instrument.
17 . A trading platform comprising:
a display device; a memory storing a set of instructions for calculating an interest rate swap volatility index associated with an underlying interest rate swaption; and a processor in communication with the display device and the memory, the processor configured to execute the set of instructions stored in the memory and to:
calculate the interest rate swap volatility index associated with the underlying interest rate swaption, wherein to calculate the interest rate swap volatility index, the processor is configured to aggregate implied volatilities of at-the-money and out-of-the-money receiver and payer interest rate swaptions;
display the interest rate swap volatility index associated with the underlying interest rate swaption on the display device;
transmit the interest rate swap volatility index associated with the underlying interest rate swaption over at least one electronic dissemination network;
wherein the processor is further configured to calculate the interest rate swap volatility index by converting implied volatilities to prices and aggregating the prices in a single equation that is independent of any option pricing model.
18 .- 30 . (canceled)Join the waitlist — get patent alerts
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