Method and system for creating and trading derivative investment instruments based on an index of collateralized options

1. A computer-readable memory containing processor executable program instructions for creating a collateralized option index according to the following steps:

calculating a value of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a LIBOR component of the portfolio at a close of date t, N old is a number of put options sold at a last roll date, and P t is a price of an underlying option portfolio based on arithmetic averages of last bid and ask prices of all options in the underlying option portfolio reported before a time on date t.

2. The computer-readable memory according to claim 1 , wherein on dates other than roll dates a value of the LIBOR component is equal to:

M t =(1+ρ t−1,t )M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

3. The computer-readable memory according to claim 2 , wherein on roll dates cash outflow from a final settlement of expiring options is debited from an account and proceeds from sales of new put options is credited to the account according to a relation:

M t =(1+ρ t−1,t ) M t−1 −N old Max[0 ,K old −SOQ t ]+ N new P vwap

where K old is a strike price of put options sold at a previous roll date, SOQ t is a final settlement price of these options on date t, N new is a number of new puts sold and P vwap is a volume-weighted average price at which the new options are sold.

4. The computer-readable memory according to claim 3 , wherein the number N new is determined according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 max[0 ,K old −SOQ t ])/(K new /(1+ r )−P vwap )

wherein K new is a strike price at which new puts are sold, and r is an effective LIBOR rate of return from a present roll date to a next roll date; and

wherein r results from compounding the rate ρ t−1,t daily from roll date t to the next roll date.

5. A computer-readable memory containing processor executable program instructions for creating a collateralized option index according to the following steps:

calculating a value (V t ) of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a money market component of the portfolio at a close of date t, N old is a number of put options sold at a previous roll date, and P t is a price of an underlying option portfolio based on arithmetic averages of last bid and ask prices of all options in the underlying option portfolio reported before a time on date t.

6. The computer-readable memory according to claim 5 , wherein on dates other than roll dates the value of a LIBOR component is equal to:

M t =(1+ρ t−1,t ) M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

7. The computer-readable memory according to claim 5 , wherein on roll dates a value of a money market account includes a cash settlement from expiring put options and proceeds from sales of new put options according to a relation:

M t =(1+ρ t−1,t ) M t−1 −N old Max[0, K old −SOQ t ]+ N new P vwap

where K old is a strike price of the put options sold at the previous roll date, SOQ t is the final settlement price of these options on roll date t, N new is a number of new puts sold and P vwap is a volume-weighted average price at which these options are sold.

8. The computer-readable memory according to claim 7 , wherein the number Nnew is determined according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 max[0, K old −SOQ t ])/( K new /(1+ r )−P vwap )

wherein K new is a strike price at which new puts are sold, and r is an effective LIBOR rate of return from a present roll date to a next roll date; and

wherein r results from compounding the rate ρ t−1,t daily from roll date t to the next roll date.

9. A computer-readable memory containing processor executable program instructions for creating a collateralized option index according to the following steps:

calculating a value (Vt) of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a money market component of the portfolio at a close of date t, N old is a number of bear spreads sold at a previous roll date, and P t is a value of the bear spread at the close, equal to a difference between arithmetic averages of last bid and ask prices of at-the-money and out-of-the-money put options reported before a time on date t.

10. The computer-readable memory according to claim 9 , wherein on dates other than roll dates a value of a LIBOR component is equal to:

M t =(1+ρ t−1,t ) M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

11. The computer-readable memory according to claim 10 , wherein on roll dates a value of a money market account includes a cash settlement from an expiring put options and proceeds from a sale of new bear spreads according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 (max[0 , K old atm −SOQ t ]−max[0 ,k old otm −SOQ t ])/(( K new atm −K new otm )/(1+ r )− P vwap )

wherein K new atm and K new otm are strike prices at which the new puts are sold and bought respectively; and

wherein r is the effective LIBOR rate of return from roll date t to the next roll date.

12. The computer-readable memory according to claim 11 , wherein the number N new is determined according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 max[0 ,K old −SOQ t ])/(K new /(1 +r )−P vwap )

wherein K new is a strike price at which new puts are sold, and r is an effective LIBOR rate of return from a present roll date to a next roll date; and

wherein r results from compounding the rate ρ t−1,t daily from roll date t to the next roll date.

13. A computer system for calculating a collateralized option index, the computer system comprising:

a processor configured to determine a value (V t ) of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a LIBOR component of the portfolio at a close of date t, N old is a number of put options sold at a last roll date, and P t is a price of an underlying option portfolio based on arithmetic averages of last bid and ask prices of all options in the underlying option portfolio reported before a time on date t; and

a communications interface configured to transmit the value of the portfolio in the collateralized short strategy to market participants over a communication network.

14. The computer system according to claim 13 , wherein on dates other than roll dates the value of the LIBOR component is equal to:

M t =(1+ρ t−1,t ) M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

15. The computer system according to claim 14 , wherein on roll dates, cash outflow from a final settlement of expiring options is debited from an account and proceeds from sales of new put options is credited to the account according to a relation:

M t =(1+ρ t−1,t ) M t−1 −N old Max[0 ,K old −SOQ t ]+N new P vwap

wherein K old is a strike price of put options sold at a previous roll date, SOQ t is a final settlement price of these options on date t, N new is a number of new puts sold and P vwap is a volume-weighted average price at which the new options are sold.

16. The computer system according to claim 15 , wherein the number Nnew is determined according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 max[0 ,K old −SOQ t ])/( K new /(1 +r )− P vwap )

wherein K new is a strike price at which new puts are sold, and r is an effective LIBOR rate of return from a present roll date to a next roll date; and

wherein r results from compounding the rate ρ t−1,t daily from roll date t to the next roll date.

17. A computer system for calculating a collateralized option index, the computer system comprising:

a processor configured to calculate a value (Vt) of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a money market component of the portfolio at a close of date t, N old is a number of put options sold at a previous roll date, and P t is a difference between arithmetic averages of a last bid and ask prices of the put option reported before a time on date t; and

a communications interface configured to transmit the value of the portfolio to market participants over a communication network.

18. The computer system according to claim 17 , wherein on dates other than roll dates the value of a LIBOR component is equal to:

M t =(1+ρ t−1,t ) M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

19. The computer system according to claim 18 , wherein on roll dates a value of a money market account includes a cash settlement from expiring put options and proceeds from sales of new put options according to a relation:

M t =(1+ρ t−1,t ) M t−1 − N old Max[0 ,K old −SOQ t ]+N new P vwap

wherein K old is a strike price of the put options sold at the previous roll date, SOQ t is a final settlement price of these options on roll date t, N new is a number of new puts sold and P vwap is a volume-weighted average price at which these options are sold.

20. The computer system according to claim 19 , wherein the number N new is determined according to a relation:

N new =( M t−1 (1+ρ t−1,t )− N t−1 max[0 ,K old −SOQ t ])/( K new /(1 +r )− P vwap )

wherein K new is a strike price at which new puts are sold, and r is an effective LIBOR rate of return from a present roll date to a next roll date; and

wherein r results from compounding the rate ρt−1,t daily from roll date t to the next roll date.

21. A computer system for calculating a collateralized option index, the computer system comprising:

a processor configured to calculate a value of a portfolio invested in a collateralized short strategy according to a relation:

V t =M t −N old P t

wherein M t is a value of a money market component of the portfolio at a close of date t, N old is a number of bear spreads sold at a previous roll date, and P t is a value of the bear spread at a close, equal to a difference between arithmetic averages of last bid and ask prices of at-the-money and out-of-the-money put options reported before a time on date t; and

a communications interface configured to transmit the value of the portfolio to market participants over a communication network.

22. The computer system according to claim 21 , wherein on dates other than roll dates a value (M t ) of a LIBOR component is equal to:

M t =(1+ρ t−1,t ) M t−1

wherein ρ t−1,t is an effective LIBOR rate from date t−1 to date t.

23. The computer system according to claim 22 , wherein on roll dates a value of a money market account includes a cash settlement from expiring put options and proceeds from a sale of new bear spreads according to a relation:

M t =(1+ρ t−1,t ) M t−1 −N old Max[0 ,K old atm −SOQ t ]+ N new P vwap

wherein K old atm is a strike price of the put options sold at the previous roll date, SOQ t is a final settlement price of these options on roll date t, N new is the number of new bear spreads sold and P vwap is a price of the spread based on a volume-weighted average prices at which at-the-money and out-of-the money put options in the spread are sold and bought respectively.

24. The computer system according to claim 23 , wherein N new is a number of new bear spreads sold on roll date t according to a relation:

N new =( M t−1 (1 +ρ t−1,t )− N t−1 (max[0 , K old atm −SOQ t ]−max[0 , K old atm −SOQ t ])/((K new atm −K new otm )/(1 +r )− P vwap )

wherein K new atm and K new otm are strike prices at which the new puts are sold and bought respectively; and

wherein r is the effective LIBOR rate of return from roll date t to the next roll date.