Methods and systems for creating and trading derivative investment products based on a SKEW index
View Patent ↗Systems and methods for creating and disseminating a SKEW index based on a statistical property reflecting the skewness of an underlying asset and creating and trading derivative investment products based on the SKEW index are disclosed. In one aspect, a SKEW index associated with an underlying asset is calculated. The SKEW index is accessed and a SKEW derivative is created based on the SKEW index. Information associated width the SKEW derivative is then transmitted for display.
1. A computer-implemented method of calculating a SKEW index associated with an underlying asset, the method comprising:
with a processor in a trading platform:
calculating a SKEW index associated with an underlying asset;
creating a skew derivative associated with the underlying asset based on the SKEW index associated with the underlying asset; and
displaying the SKEW index associated with the underlying asset and the SKEW derivative associated with the underlying asset on a trading platform display device coupled with the trading platform;
wherein the SKEW index is calculated based on the equation:
S
=
E
R
÷
3
,
where S represents a market price of a skewness payoff determined by an asymmetry of the plurality of returns associated with the underlying asset; R is a log return of the underlying asset at an end of a calculation period, μ is a mean of the log return of the underlying asset at the end of the calculation period, and σ is a standard deviation of the log return of the underlying asset at the end of the calculation period;
x
=
R
÷
3
represents the skewness payoff; and S=E[x] is a market price representing a risk adjusted expectation of the skewness payoff (x).
2. The computer-implemented method of claim 1 , wherein the underlying asset is the S&P 500® and the calculation period is 30 days.
3. The computer-implemented method of claim 1 , wherein the underlying asset is selected from the group consisting of: commodity or structured products traded on a trading platform or over-the-counter market; equity indexes or securities; fixed income indexes or securities; foreign currency exchange rates; interest rates; and commodity indexes.
4. The computer-implemented method of claim 1 , wherein the SKEW index is calculated based on the equation:
SKEW index=100−10 *S.
5. The computer-implemented method of claim 1 , wherein S is derived based on the equation:
S=wS near +(1 −w ) S next ,
where S near and S next , are prices of skewness at derivatives with adjacent expirations; w=(T next −T N )/(T next −T near ); T near and T next , are times to expiration of the near and next term derivatives expressed in minutes; and T N is the number of minutes during the calculation period.
6. The computer-implemented method of claim 1 , further comprising:
transmitting the SKEW index associated with the underlying asset over a least one electronic dissemination network.
7. The computer-implemented method of claim 1 , wherein the trading platform is an exchange.
8. A trading system comprising:
a display device;
a memory storing a set of instructions for calculating a SKEW index associated with an underlying asset and creating a SKEW derivative associated with the underlying asset based on the SKEW index; 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 a SKEW index associated with an underlying asset;
create a SKEW derivative associated with the underlying asset based on the SKEW index; and
display the SKEW index associated with the underlying asset and the SKEW derivative associated with the underlying asset on the display device;
wherein the SKEW index is calculated based on the equation:
S
=
E
[
(
R
-
μ
σ
)
3
]
,
where S represents a market price of a skewness payoff determined by an asymmetry of the plurality of returns associated with the underlying asset; R is a log return of the underlying asset at an end of a calculation period, μ is a mean of the log return of the underlying asset at the end of the calculation period, and σ is a standard deviation of the log return of the underlying asset at the end of the calculation period;
x
=
(
R
-
μ
σ
)
3
represents the skewness payoff; and S=E[x] is a market price representing a risk adjusted expectation of the skewness payoff (x).
9. The trading system of claim 8 , wherein the SKEW index is calculated based on the equation:
SKEW index=100−10 *S.
10. A computer-implemented method of creating a SKEW derivative, the method comprising:
accessing a SKEW index associated with an underlying asset;
creating, with a processor, a SKEW derivative based on the SKEW index; and
transmitting, with the processor, information associated with the SKEW derivative for display;
wherein the SKEW index is calculated based on the equation:
S
=
E
R
÷
3
,
where S represents a market price of a skewness payoff determined by an asymmetry of the plurality of returns associated with the underlying asset; R is a loci return of the underlying asset at an end of a calculation period, μ is a mean of the loci return of the underlying asset at the end of the calculation period, and σ is a standard deviation of the loci return of the underlying asset at the end of the calculation period;
x
=
R
÷
3
represents the skewness payoff; and S=E[x] is a market price representing a risk adjusted expectation of the skewness payoff (x).
11. The computer-implemented method of claim 10 , wherein the SKEW index is calculated based on the equation:
SKEW index=100−10 *S.
12. The computer-implemented method of claim 10 , wherein S is derived based on the equation:
S=wS near +(1 −w ) S next ;
where S near and S next ; are prices of skewness at derivatives with adjacent expirations; w=(T next −T N )— (T next −T near ); T near and T next , are times to expiration of the near and next term derivatives expressed in minutes; and T N is the number of minutes during the calculation period.
13. The computer-implemented method of claim 10 , wherein the SKEW derivative is a SKEW option contract.
14. The computer-implemented method of claim 13 , wherein the underlying asset is the S&P 500®.
15. The computer-implemented method of claim 10 , wherein the SKEW derivative is a SKEW futures contract.
16. The computer-implemented method of claim 10 , wherein the underlying asset is selected from the group consisting of: commodity or structured products traded on a trading platform or over-the-counter market; equity indexes or securities; fixed income indexes or securities; foreign currency exchange rates; interest rates; and commodity indexes.
17. The computer-implemented method of claim 10 , further comprising:
executing trades at a trading platform for the SKEW derivative by matching bids and offers to buy and sell positions in the SKEW derivative.
18. The computer-implemented method of claim 17 , wherein the trading platform is an open outcry platform.
19. The computer-implemented method of claim 17 , wherein the trading platform is an electronic platform.
20. The computer-implemented method of claim 17 , wherein the trading platform is a hybrid of an open outcry platform and an electronic platform.
21. The computer-implemented method of claim 10 , further comprising:
transmitting a SKEW derivative quote from a trading platform over a least one electronic dissemination network.
22. The computer-implemented method of claim 21 , wherein the trading platform is an exchange.
23. The computer-implemented method of claim 10 , wherein the information associated with the SKEW derivative that is transmitted for display comprises a settlement price of the SKEW derivative.
24. The computer-implemented method of claim 10 , wherein the information associated with the SKEW derivative that is transmitted for display comprises a bid associated the SKEW derivative.
25. The computer-implemented method of claim 10 , wherein the information associated with the SKEW derivative that is transmitted for display comprises an offer associated the SKEW derivative.
26. A system comprising:
a memory storing a set of instructions for creating a SKEW derivative; and
a processor in communication with the memory, the processor configured to execute the set of instructions stored in the memory and to:
access a SKEW index associated with an underlying asset;
create the SKEW derivative based on the SKEW index; and
transmit information associated with the SKEW derivative for display;
wherein the SKEW index is calculated based on the equation:
S
=
E
R
÷
3
,
where S represents a market price of a skewness payoff determined by an asymmetry of the plurality of returns associated with the underlying asset; R is a log return of the underlying asset at an end of a calculation period, μ is a mean of the loci return of the underlying asset at the end of the calculation period, and σ is a standard deviation of the loci return of the underlying asset at the end of the calculation period;
x
=
R
÷
3
represents the skewness payoff; and S=E[x] is a market price representing a risk adjusted expectation of the skewness payoff (x).
27. The system of claim 26 , wherein the SKEW index is calculated based on the equation:
SKEW index=100−10 *S.
28. The system of claim 26 , wherein the underlying asset is the S&P 500®.
29. The system of claim 26 , wherein the information associated with the SKEW derivative that is transmitted for display comprises a settlement price of the SKEW derivative.
30. The system of claim 26 , wherein the information associated with the SKEW derivative that is transmitted for display comprises a bid associated the SKEW derivative.
31. The system of claim 26 , wherein the information associated with the SKEW derivative that is transmitted for display comprises an offer associated the SKEW derivative.