Patent ID: 7630931
Filing Date: 2009-12-08
Classification: G06Q

Abstract:
1. A computer-implemented system for determining prices of derivatives, comprising: a memory comprising a database configured to store historical prices of underlying assets and historical prices of derivatives of the underlying assets; a processor configured to execute computer executable code stored in program modules, comprising: a stochastic process modeling module, comprising: a time series module configured to generate a time series process describing risk factors comprising returns for the underlying assets; a smooth truncation module configured to generate a smoothly truncated heavy tailed asymmetric probability distribution and by replacing the left and right heavy tails of a Stable distribution based on the time series process by a first and second normal distribution, respectively, in accordance with the equation: an innovation module configured to determine an innovation process, wherein marginals of the probability distribution of the innovation process comprise the smoothly truncated heavy tailed and asymmetric probability distribution; a calibrator module configured to set parameters for the innovation process to match the historical prices, in accordance with the equation: log S where S a derivative pricing calculator module configured to determine future prices of derivatives comprising options and swaps by executing the innovation process on the parameters; an output device configured to provide future prices of the derivatives, and a network to operatively couple and provide communication between the database, the output device, and the computer processor.