Volatility based futures products

Patent metadata

Field	Value
Publication number	US-9710854-B2
Application number	US-201314134922-A
Country	US
Kind code	B2
Filing date	Dec 19, 2013
Priority date	Dec 19, 2013
Publication date	Jul 18, 2017
Grant date	Jul 18, 2017

Abstract

A method of providing a financial product may include obtaining, by a computer device, pricing information about a financial market over a specified duration, the pricing information including at least a high price and a low price occurring within the duration. The computer device may be configured for determining a volatility associated with the market, the volatility based, at least in part, on the pricing information and determining a settlement price for a cash settled futures product using the volatility of the market over the specified duration.

First claim

The invention claimed is:

1. A method comprising:
obtaining, by a market data module of an exchange computing system from a financial exchange computing system via a network by the exchange computing system comprising at least one volatility estimator, a settlement calculator, and pricing information about a financial market over a specified duration, the pricing information including at least a high price and a low price occurring within the specified duration, wherein the network comprises the Internet, wherein obtaining the pricing information further comprises obtaining, via the network by the exchange computing system from the financial exchange computing system, an opening price at a start of the duration and a closing price at an end of the duration;
determining, by the at least one volatility estimator of the exchange computing system, a volatility value associated with the market based on one or more volatility estimation algorithms, the volatility value based, at least in part, on the pricing information;
transforming, by the settlement calculator of the exchange computing system, the volatility value into a cash settlement price for a cash settled futures product based on information from one or more volatility estimators; and
offering, to a market participant by the exchange computing system via a network interface, the cash settled futures product to a market participant via the network by the exchange computing system, wherein the cash settled futures product is based on the volatility value determined by the volatility estimator.

2. The method of claim 1 , wherein determining the volatility associated with the market by the volatility estimator, comprises determining the volatility using a volatility estimator based on a Parkinson equation.

3. The method of claim 1 , wherein determining the volatility associated with the market, by the volatility estimator comprises determining the volatility using a volatility estimator based on a Garman-Klass equation.

4. The method of claim 1 , wherein determining the volatility associated with the market, by the volatility estimator comprises determining the volatility using a volatility estimator based on a Rogers-Satchell equation.

5. The method of claim 1 , wherein determining the volatility associated with the market, by the volatility estimator comprises determining the volatility using a volatility estimator based on a Yang-Zhang equation.

6. The method of claim 1 , wherein determining the volatility associated with the market, by the volatility estimator comprises determining the volatility using a volatility estimator based on a Garman-Klass Yang-Zhang extension equation.

7. The method of claim 1 , wherein the duration corresponds to a duration of trading activity on the financial market determined by a timer of the exchange computing system.

8. The method of claim 1 , wherein the duration corresponds to at least a 24-hour volatility calculation window determined by a timer of the exchange computing system.

9. The method of claim 1 , wherein determining the settlement price for the cash settled futures product comprises the settlement calculator of the exchange computing system using a mathematical transformation of the volatility of the market over the specified duration.

10. A method comprising:
receiving, by a market data module of an exchange computing system from a financial exchange computing system via the internet, pricing information about a financial market computing system corresponding to a specified duration, the pricing information including at least a high price and a low price occurring within the specified duration;
determining, by a volatility estimator of the exchange computing system, a volatility associated with a financial market, the volatility based, at least in part, on at least two of an open price, a close price, the high price and the low price corresponding to the financial market, the volatility corresponding to market volatility over the specified duration, the specified duration received from a timer; and
transforming, by a settlement calculator of the exchange computing system, a cash settlement price for a cash settled futures product based, at least in part, on the volatility of the market;
communicating, to a clearinghouse module of the exchange computing system, the cash settlement price for use in computing a performance bond requirement associated with the cash settled futures product; and
offering, via the Internet by the exchange computing system, the cash settled futures product to a market participant, wherein the cash settled futures product is based on the volatility determined by the volatility estimator.

11. The method of claim 10 , wherein determining the volatility associated with the market comprises calculating the volatility using a mathematical algorithm including a Yang-Zhang estimator.

12. The method of claim 10 , wherein determining the volatility associated with the market comprises calculating the volatility using a mathematical algorithm including at least one of a Parkinson estimator, a Garman-Klass estimator, a Rogers-Satchell estimator, a Garmin-Klass Yang-Zhang extension estimator.

13. The method of claim 10 , wherein determining the volatility associated with the market comprises modeling a pricing difference between a market close price and a following market open price.

14. The method of claim 10 , wherein the volatility corresponds to a duration where the financial market is open for trading.

15. The method of claim 10 , wherein the volatility corresponds to a duration greater than or equal to 24 hours.

16. The method of claim 10 , wherein the volatility corresponds to a duration less than a trading day of the financial market.

17. A system comprising:
a user interface;
a processor of an exchange computing system;
a non-transitory memory communicatively coupled to the processor, the memory storing instructions, that when executed, cause the processor to:
obtain, at the exchange computing system via the internet, pricing information about a financial market over a plurality of different timeframes, the pricing information including at least a high price and a low price occurring within each of the plurality of timeframes;
determine, by a volatility estimator of the exchange computing system, a volatility associated with the market based on an input received via the user interface, the volatility based, at least in part, on the pricing information for each of the plurality of timeframes; and
determine, by a settlement calculator of the exchange computing system, a settlement price for a cash settled futures product based, at least in part, on the volatility of the market for at least two of the plurality of timeframes; and
offer, to a market participant via a network interface, the cash settled futures product to a market participant via the network by the exchange computing system, wherein the cash settled futures product is based on the volatility determined by the volatility estimator.

18. The system of claim 17 , wherein the non-transitory memory stores instructions, that when executed, cause the processor to enable to volatility estimator to determine the volatility of the market using a Yang-Zhang estimator.

19. The system of claim 17 , further comprising:
a financial market computer device configured to communicate financial market pricing information over a network; and
wherein, the non-transitory memory stores instructions, that when executed, cause the processor to:
determine, by a timer, a sp

Assignees

• Chicago Mercantile Exchange Inc
• Chicago Mercantile Exchange Inc

Inventors

• Kerpel John
• Labuszewski John
• Nyhoff John
• Aldinger Lori
• Co Richard

Classifications

• G06Q40/04 Primary

  Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange · CPC title