Patent ID: 7392211
Filing Date: 2008-06-24
Classification: G06Q

Abstract:
1. A computer-implemented method for trading in a financial derivative of an underlying asset, comprising: determining a trend of a stochastic process, which is predictive of a future value of the asset and a predicted variance of the future value; using a computer to calculate a first density function indicative of a probability distribution of the value at a first time in the future responsive to the trend and the variance; calculating a second density function based on the first density function at the first time, by integrating a random variable representative of the stochastic process over the first density function at the first time to find the probability distribution of the value at a second time, subsequent to the first time, wherein the random variable has a plurality of discrete values with a normal probability distribution and the random variable comprises a convex superposition of mutually-translated delta functions comprising at least the following formula; computing at least one of an expected value of the asset and an expected yield of the financial derivative based on the second density function as a basis for making a trading decision with regard to the derivative of the asset.