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Apparatus, method and system for determining credit derivative indices and estimating credit derivative credit curves, and a credit calculator for valuing credit derivatives based on the credit curves

Inactive Publication Date: 2018-12-20
GFI GROUP INC
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  • Summary
  • Abstract
  • Description
  • Claims
  • Application Information

AI Technical Summary

Benefits of technology

This approach enables accurate estimation of CDS spreads for entities with limited observations, providing stable and reliable average levels of credit derivative pricing data, including five-year credit default swaps, and extends to less frequently observed attributes through regression analysis with exponentially declining weights.

Problems solved by technology

The Credit Event may be a bankruptcy, an insolvency, a receivership, a material adverse restructuring of debt, or a failure to meet payment obligations when due.

Method used

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  • Apparatus, method and system for determining credit derivative indices and estimating credit derivative credit curves, and a credit calculator for valuing credit derivatives based on the credit curves
  • Apparatus, method and system for determining credit derivative indices and estimating credit derivative credit curves, and a credit calculator for valuing credit derivatives based on the credit curves
  • Apparatus, method and system for determining credit derivative indices and estimating credit derivative credit curves, and a credit calculator for valuing credit derivatives based on the credit curves

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Embodiment Construction

[0046]For a certain population of interest there are a number of entities, some of which are members of the population of interest at any given time. For example, the population of interest may be all entities or companies having a particular credit rating or that comprise a particular industry sector, such as, for example, aerospace, automotive, steel, etc. The set of entities that are members of the population, however, will change through time. In this regard, for example, a particular company having a credit rating of A might be downgraded to Baa or upgraded to Aa, and therefore leave the population of companies having a credit rating of A. Likewise, a company having a credit rating of Aa may be downgraded to A, and therefore join the population of companies having a credit rating of A.

[0047]Furthermore, there will be certain quantifiable attributes of the entities that may be of interest, such as, for example, the price of a financial instrument. In particular, for example, the...

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Abstract

An apparatus, method and system for determining an estimate of at least one numerical attribute of at least one entity of a population when the population is changing and there are a limited number of observations on the attribute for the entities, in which a conditional index is determined to track how a value of the attribute changes from one time to another for an entity that is a member of the population at both times, and an unconditional index is determined representing an average level of the attribute for the entities of the population.

Description

FIELD OF THE INVENTION[0001]The present invention relates to an apparatus, method and system for determining credit derivative indices and estimating credit derivative credit curves, and a credit calculator for valuing credit derivatives based on the credit curves.BACKGROUND INFORMATION[0002]In the financial markets, there are various types of credit derivative financial instruments. A credit default swap (CDS) is one type of credit derivative. A CDS allows credit risks to be traded and managed in a manner similar to that of market risks. A CDS is a contract that provides insurance against default by a particular company. With a CDS, a seller receives a fee in exchange for making a contingent payment if there is a Credit Event (default) of the Reference Entity (the company). The Credit Event may be a bankruptcy, an insolvency, a receivership, a material adverse restructuring of debt, or a failure to meet payment obligations when due. The CDS buyer has the right to sell the Reference...

Claims

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Application Information

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Patent Type & Authority Applications(United States)
IPC IPC(8): G06Q40/02G06Q99/00G06Q40/06
CPCG06Q40/02G06Q99/00G06Q40/06
Inventor HULL, JOHN CAMPBELLWHITE, ALAN DOUGLASGOOCH, MICHAELWOODHAMS, MATTHEW
Owner GFI GROUP INC