Methods and apparatus relating to the formulation and trading of investment contracts
A system to enable the formulation of multi-party investments contracts. The system allows an ordering party to input contract data relating to at least one phenomenon that has a range of future outcomes and a future time of maturity. The contract data further includes a set of probabilities of occurrence for each outcome in the range and a consideration due to a counterparty at or after the time of maturity. One or more counterparties can input registering data including a set of probabilities of occurrence for each outcome in the range. The system prices and matches a contract by applying at least one template of entitlement as a function of outcome to each counterparty's set of probabilities to give one or more individual counterparty prices each equal to the ordering party's consideration, and further, applying the ordering party's set of probabilities to each template to derive an implied entitlement.
1. A data processing system to enable the formulation of multi-party investment contracts, the system comprising:
input means for allowing an ordering party to input contract data relating to a least one phenomenon, each said phenomenon having a range of future outcomes and a future time of maturity, the contract data including a set of probabilities of occurrence for each outcome in said range and a consideration due to a counterparty at or after the time of matching, and further by which at least one counterparty can input registering data including a set of probabilities of occurrence for each outcome in said range; and
a processor configured to price and match a contract for a said phenomenon from said contract data and said registering data, wherein said processor configured to price said contract by:
applying at least one template of entitlement as a function of outcome to each counterparty's set of probabilities to give one or more individual counterparty prices each equal to the ordering party's consideration; and
applying the ordering party set of probabilities to each said template to derive an implied entitlement;
wherein said processor is configured to match said contract by:
determining which counterparty will provide the best entitlement on maturity by comparing each implied entitlement with the consideration; and
wherein said processor is configured to match the contract with that counterparty having the template for the best said comparison.
2. A data processing system to enable the formulation of a multi-party investment contract, the system comprising:
a data storage unit having stored therein information about a phenomenon having a set of future outcomes and a future time of maturity; and
a computer, coupled to said data storage unit, that is configured to
(a) receive contract data from a first party including a set of probabilities of occurrence for each outcome in said range and a consideration due to a second party at or after the time of matching; and
(b) receive registering data from at least one second party including a set of probabilities of occurrence for each outcome in said range;
(c) for each second party, price a contract by applying at least one template of entitlement as a function of outcome to the second party's set of probabilities to give one or more individual second party prices each equal to said consideration, and applying said first party set of probabilities to each said template of entitlement to derive one or more implied entitlement valuations;
(d) match a contract for said phenomenon from said contract data and registering data, including:
i. determining which second party will provide the best entitlement on maturity by comparing each implied entitlement valuation with said consideration, and
ii. matching a contract with that second party having a template of entitlement for the best said comparison;
(e) store said contract in said data storage unit.
3. A data processing system to enable the formulation of a multi-party investment contract, the system comprising:
a data storage unit having stored therein
(a) information about a phenomenon having a set of future outcomes and a future time of maturity; and
(b) a set of entitlement shapes;
a computer, coupled to said data storage unit, that is configured to
(a) receive contract data from a first party including a set of probabilities of occurrence for each outcome in said range, a selected entitlement shape from the set of entitlement shapes and a consideration due to a second party at or after the time of matching; and
(b) receive registering data from at least one second party including a set of probabilities of occurrence for each outcome in said range;
(c) for each second party, price a contract by applying at least one template of entitlement derived from said selected entitlement shape as a function of outcome to the second party's set of probabilities to give one or more individual second party prices each equal to said consideration, and applying said first party set of probabilities to each said template of entitlement to derive one or more implied entitlement valuations;
(d) match a contract for said phenomenon from said contract data and registering data, including:
i. determining which second party will provide the best entitlement on maturity by comparing each implied entitlement valuation with said consideration, and
ii. matching a contract with that second party having a template of entitlement for the best said comparison;
(e) store said contract in said data storage unit.
4. A data processing system as in claim 3 , wherein said selected entitlement shape is a capped downward sloping (45-degree) shape.
5. A data processing system as in claim 3 , wherein said selected entitlement shape is a capped downward perpendicular (90-degree) shape.
6. A data processing system as in claim 3 , wherein said selected entitlement shape is a capped upward sloping (45-degree) shape.
7. A data processing system as in claim 3 , wherein said selected entitlement shape is a capped upward perpendicular (90-degree) shape.
8. A data processing system to enable the formulation of a multi-party investment contract, the system comprising:
a data storage unit having stored therein information about a phenomenon having a set of future outcomes and a future time of maturity; and
a computer, coupled to said data storage unit, that is configured to
(a) receive contract data from a first party including a set of probabilities of occurrence for each outcome in said range, a specified entitlement shape and a consideration due to a second party at or after the time of matching; and
(b) receive registering data from at least one second party including a set of probabilities of occurrence for each outcome in said range;
(c) for each second party, price a contract by applying at least one template of entitlement derived from said specified entitlement shape as a function of outcome to the second party's set of probabilities to give one or more individual second party prices each equal to said consideration, and applying said first party set of probabilities to each said template of entitlement to derive one or more implied entitlement valuations;
(d) match a contract for said phenomenon from said contract data and registering data, including:
i. determining which second party will provide the best entitlement on maturity by comparing each implied entitlement valuation with said consideration, and
ii. matching a contract with that second party having a template of entitlement for the best said comparison;
(e) store said contract in said data storage unit.