Credit event referenced asset that minimizes an investor's risk of loss of principal
View Patent ↗A credit event referenced asset having a par value includes (a) a provision for a right of a creditor to receive interest on the asset for a credit term, wherein the interest is reduced if a credit event occurs with respect to a reference entity, and (b) a provision for a right of the creditor to receive the par value at a maturity date of the asset.
1. A system, comprising:
memory operable to store at least one program; and
at least one processor communicatively coupled to the memory, in which the at least one program, when executed by the at least one processor, causes the at least one processor to:
access and process data regarding a credit event referenced asset comprising a credit term, a maturity date and a par value, wherein said maturity date is later than an end of said credit term; and
calculate, for said credit term, interest at a first interest rate until a credit event occurs during said credit term,
record, after the occurrence of the credit event during said credit term, an extension of said maturity date to a later extended maturity date,
calculate, after the occurrence of the credit event during said credit term, interest at a second interest rate until said later extended maturity date,
record data regarding an investment received in exchange for a payment of said par value, wherein said investment matures to said par value at said maturity of said asset, and
calculate, when no credit event occurs during said credit term, interest at a third interest rate for a time period from the end of said credit term to said maturity date.
2. The system of claim 1 , wherein an issuer of said asset receives said par value in exchange for issuing said credit event referenced asset.
3. The system of claim 1 , wherein said credit event is selected from the group consisting of bankruptcy, failure to make payment on a debt, obligation acceleration, repudiation/moratorium, and restructuring.
4. The system of claim 1 , wherein said investment is a zero interest bond.
5. A computer implemented method, comprising:
accessing, by a processor, data regarding a credit event referenced asset comprising a credit term, a maturity date and a par value, wherein said maturity date is later than an end of said credit term;
calculating, by a processor, for said credit term, interest at a first interest rate until a credit event occurs during said credit term;
after the occurrence of the credit event during said credit term;
recording, by a processor, an extension of said maturity date to a later extended maturity date,
calculating, by a processor, interest at a second interest rate until said later extended maturity date, and
record data regarding an investment received in exchange for a payment of said par value, wherein said investment matures to said par value at said maturity of said asset; and
when no credit event occurs during said credit term:
calculating, by a processor, interest at a third interest rate for a time period from the end of said credit term to said maturity date.
6. The method of claim 5 , wherein said investment is a zero interest bond.
7. The method of claim 5 , wherein an issuer of said asset receives said par value in exchange for issuing said credit event referenced asset.
8. The method of claim 5 , wherein said credit event is selected from the group consisting of bankruptcy, failure to make payment on a debt, obligation acceleration, repudiation/moratorium, and restructuring.