Patent Publication Number: US-2015066810-A1

Title: Systems and methods for obtaining a deterministic value for one or more financial products

Description:
FIELD OF THE INVENTION 
     The present invention relates to obtain a deterministic value for one or more financial products, and in particular, to systems and methods for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products. 
     BACKGROUND 
     Financial products like structured products are complex products which have a deposit component and an option component. Products have a guaranteed interest component and an enhanced interest component. Product owners in the bank would have to create such products and would need product rules to calculate these variable interest components for the product and also the mode of payment and currency of payment. Financial Product may require complex rules to determine value of interest, mode of payment or currency of payment based on various underlying. It is difficult to calculate the variables manually and the product owners find it difficult to simulate or reconcile the value determined for those products by the issuer or by bank treasury. The product owners in the bank need to the IT team in banks to handle these rules. 
     In view of the foregoing discussion, there is a need for a rule engine having a simple user front end that would help financial product owners to create the rules and map the rules to various financial products. 
     SUMMARY 
     The present invention has provided a business rule front end by which the financial product owners can create the business rules and map the rules to the financial products. This can be used in retail banking to deposit products with some underlying. According to the present embodiment, a method for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products is disclosed. The method includes defining one or more rules for obtaining the deterministic value of the interest, the mode of payment and currency of payment for the one or more financial products. Thereafter the one or more rules are attached to the one or more financial products. After that, the one or more rules are executed at the time of cash flow event calculation to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the one or more financial products. 
     In an additional embodiment, a system for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products is disclosed. As disclosed, the embodiment includes a rule definition module, a rule attachment module and a rule execution module. The rule definition module is configured to define one or more rules for the one or more financial products. In accordance with an embodiment of the present invention, the rule definition module includes an interest rule definition module configured to define one or more interest rules to obtain the deterministic value of the interest, a currency rule definition module configured to define one or more currency rules to obtain the deterministic value of the currency of payment and a principal rule definition module configured to define one or more principal rules to obtain the deterministic value of the mode of payment. The rule attachment module is configured to attach the one or more rules to the one or more financial product. The rule execution module is configured to execute the one or more rules to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the financial product. In accordance with an embodiment of the present invention, the one or more rules are executed at the time of cash flow event calculation. 
     In another embodiment, a computer program product for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products is disclosed. The computer program product includes a computer usable medium having a computer readable program code embodied therein for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products. The computer readable program code storing a set of instructions configured for defining one or more rules for the one or more financial products, attaching the one or more rules to the one or more financial product, executing the one or more rules to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the financial product. 
    
    
     
       DRAWINGS 
       Various embodiments of the invention will, hereinafter, be described in conjunction with the appended drawings provided to illustrate, and not to limit the invention, wherein like designations denote like elements, and in which: 
         FIG. 1  is a computer architecture diagram illustrating a computing system capable of implementing the embodiments presented herein. 
         FIG. 2  is a block diagram illustrating a system for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products, in accordance with an embodiment of the present invention. 
         FIG. 3  is a flowchart, illustrating a method for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products, in accordance with an embodiment of the present invention. 
     
    
    
     DETAILED DESCRIPTION 
     The foregoing has broadly outlined the features and technical advantages of the present disclosure in order that the detailed description of the disclosure that follows may be better understood. Additional features and advantages of the disclosure will be described hereinafter which form the subject of the claims of the disclosure. It should be appreciated by those skilled in the art that the conception and specific embodiment disclosed may be readily utilized as a basis for modifying or designing other structures for carrying out the same purposes of the present disclosure. It should also be realized by those skilled in the art that such equivalent constructions do not depart from the spirit and scope of the disclosure as set forth in the appended claims. The novel features which are believed to be characteristic of the disclosure, both as to its organization and method of operation, together with further objects and advantages will be better understood from the following description when considered in connection with the accompanying figures. It is to be expressly understood, however, that each of the figures is provided for the purpose of illustration and description only and is not intended as a definition of the limits of the present disclosure. 
     Exemplary embodiments of the present disclosure provide a system and method for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products where one or more rules are defined for the one or more financial products and then the one or more rules are attached to the one or more financial products. The one or more rules are executed at the time of cash flow event calculation to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the financial product. 
       FIG. 1  illustrates a generalized example of a suitable computing environment  100  in which all embodiments, techniques, and technologies of this invention may be implemented. The computing environment  100  is not intended to suggest any limitation as to scope of use or functionality of the technology, as the technology may be implemented in diverse general-purpose or special-purpose computing environments. For example, the disclosed technology may be implemented using a computing device (e.g., a server, desktop, laptop, hand-held device, mobile device, PDA, etc.) comprising a processing unit, memory, and storage storing computer-executable instructions implementing the service level management technologies described herein. The disclosed technology may also be implemented with other computer system configurations, including hand held devices, multiprocessor systems, microprocessor-based or programmable consumer electronics, network PCs, minicomputers, mainframe computers, a collection of client/server systems, and the like. 
     With reference to  FIG. 1 , the computing environment  100  includes at least one central processing unit  102  and memory  104 . The central processing unit  102  executes computer-executable instructions. In a multi-processing system, multiple processing units execute computer-executable instructions to increase processing power and as such, multiple processors can be running simultaneously. The memory  104  may be volatile memory (e.g., registers, cache, RAM), non-volatile memory (e.g., ROM, EEPROM, flash memory, etc.), or some combination of the two. The memory  104  stores software  116  that can, for example, implement the technologies described herein. A computing environment may have additional features. For example, the computing environment  100  includes storage  108 , one or more input devices  110 , one or more output devices  112 , and one or more communication connections  114 . An interconnection mechanism (not shown) such as a bus, a controller, or a network, interconnects the components of the computing environment  100 . Typically, operating system software (not shown) provides an operating environment for other software executing in the computing environment  100 , and coordinates activities of the components of the computing environment  100 . 
       FIG. 2  is a block diagram illustrating a system for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products, in accordance with an embodiment of the present invention. More particularly, in  FIG. 2 , a system  200  includes a rule definition module  202 , a rule attachment module  210  and a rule execution module  212 . In various embodiments of the present disclosure, the rule definition module  202  is configured to define one or more rules for the one or more financial products. The one or more rules are associated with a function code and a Rule ID. The examples of the function code includes but are not limited to Add, Copy, Delete, Inquire, Modify, Verify and Cancel. The Rule ID is used to identify the one or more rules. The Rule ID is required to be specified in “Add” function code and for other function codes the Rule ID may be selected from a list. For a Rule ID, either one or more rules can be defined or one or more scripts can be attached. The one or more scripts provide flexibility to users to have custom logic. In accordance with an embodiment of the present invention, the rule definition module  202  includes an interest rule definition module  204  configured to define one or more interest rules to obtain the deterministic value of the interest, a currency rule definition module  206  configured to define one or more currency rules to obtain the deterministic value of the currency of payment and a principal rule definition module  208  configured to define one or more principal rules to obtain the deterministic value of the mode of payment. 
     The rule attachment module  210  is configured to attach the one or more rules to the one or more financial products. The one or more financial products can be categorized into one or more product types. The one or more product types include but are not limited to currency linked product, equity linked product, interest linked product and index linked product. The one or more rules are defined based on the one or more product types, one or more rule types, one or more product parameters and one or more spot parameters of the one or more financial products. The one or more rule types include an interest rule, a principal rule and a currency rule. The examples of the one or more product parameters include but are not limited to Interest Rate, Payment Mode, Cash, Equity, Product currency (product CCY), Underlying currency (underlying CCY), Payment currency (payment CCY), Lower Interest Strike, Upper Interest Strike, Lower Index Strike, Upper Index Strike, Lower FX Strike, Upper FX Strike, Lower Equity Strike and Upper Equity Strike. The one or more spot parameters include but are not limited to Spot price, Spot FX Rate, Spot Interest Rate and Spot Index Value. The one or more currency rules are applied to currency linked products and the one or more principal rules are applied to equity linked products. 
     The one or more rules for the one or more financial products are written as a condition. If the condition is true then a value is assigned. The step of defining the one or more rules includes at least one success step and at least one failure step. The operators can be used to define the one or more rules are =, &gt;, &lt;, &gt;=, &lt;=, +, * , /. The rule execution module  212  is configured to execute the one or more rules to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the one or more financial products. The one or more rules are executed at the time of cash flow event calculation. 
       FIG. 3  is a flowchart, illustrating a method for obtaining a deterministic value of an interest, a mode of payment and a currency of payment for one or more financial products, in accordance with an embodiment of the present invention. The method includes defining one or more rules for the one or more financial products, at step  302 . The step of defining one or more rules includes selecting a function code for the one or more rules. The function code includes Add, Copy, Delete, Inquire, Modify, Verify and Cancel. The one or more rules are identified by one or more Rule IDs. For a Rule ID, either one or more rules can be defined or one or more scripts can be attached. The one or more scripts provide flexibility to users to have custom logic. 
     The one or more rules are defined under an interest rule or a principal rule or a currency rule. The one or more rules are defined based on the rule types (interest rule, principal rule, currency rule), one or more product types, one or more product parameters and one or more spot parameters. The one or more product parameters include Interest Rate, Payment Mode, Cash, Equity, Product currency (product CCY), Underlying currency (underlying CCY), Payment currency (payment CCY), Lower Interest Strike, Upper Interest Strike, Lower Index Strike, Upper Index Strike, Lower FX Strike, Upper FX Strike, Lower Equity Strike and Upper Equity Strike. The one or more spot parameters include but are not limited to Spot price, Spot FX Rate, Spot Interest Rate and Spot Index Value. 
     Referring back to  FIG. 3 , the one or more rules are attached to the one or more financial products, at step  304 . The types of the one or more financial products include currency linked products, equity linked products, interest linked products and index linked products. The one or more product parameters are mapped with the one or more financial product definition field. The mapping may be as follows: 
     
       
         
           
               
               
               
             
               
                   
               
               
                 Sl.  
                 Rule def. front end  
                   
               
               
                 No. 
                 field 
                 Product definition field 
               
               
                   
               
             
            
               
                   
               
            
           
           
               
               
               
            
               
                 1 
                 Equity 
                 Underlying Equity Code 
               
               
                 2 
                 Product CCY 
                 Product CCY 
               
               
                 3 
                 Underlying CCY 
                 Underlying CCY Code 
               
               
                 4 
                 Lower Interest Strike 
                 Lower Strike Value for underlying Interest  
               
               
                   
                   
                 rate code 
               
               
                 5 
                 Upper Interest Strike 
                 Upper Strike Value for underlying Interest  
               
               
                   
                   
                 rate code 
               
               
                 6 
                 Lower equity Strike 
                 Lower Strike Value for Underlying Equity  
               
               
                   
                   
                 Code 
               
               
                 7 
                 Upper equity Strike 
                 Upper Strike Value for Underlying Equity  
               
               
                   
                   
                 Code 
               
               
                 8 
                 Lower FX Strike 
                 Lower Strike Value for Underlying CCY 
               
               
                 9 
                 Upper FX Strike 
                 Upper Strike Value for Underlying CCY 
               
               
                 10 
                 Lower Index Value 
                 Lower Strike Value for underlying Index 
               
               
                 11 
                 Upper Index Value 
                 Upper Strike Value for underlying Index 
               
               
                   
               
            
           
         
       
     
     The one or more rules for the one or more financial products are written as a condition. A value can be assigned if the condition is true or false. The step of defining the one or more rules includes at least one success step and at least one failure step. The one or more rules are executed to obtain the deterministic value of the interest, the mode of payment and the currency of payment for the financial product, at step  306 . The execution of the one or more rules is performed at the time of cash flow event calculation. An exemplary expression of defining the one or more interest rules and their execution may be as follows: 
     
       
         
           
               
             
               
                   
               
             
            
               
                 If (Lower index strike &lt; Spot price index Value &lt; Upper index Strike) 
               
               
                 Interest Rate = 10% 
               
               
                 Else 
               
               
                 Interest Rate = 5% 
               
               
                   
               
            
           
         
       
     
     The above rule is defined in the system using the steps: 
     
       
         
           
               
               
               
               
               
             
               
                   
                   
               
               
                   
                 Step No. 
                 Expression 
                 Success Step 
                 Failure Step 
               
               
                   
                   
               
             
            
               
                   
                 1 
                 Lower index strike &lt; 
                 2 
                 4 
               
               
                   
                   
                 Spot price index 
                   
                   
               
               
                   
                   
                 Strike 
                   
                   
               
               
                   
                 2 
                 Spot price index 
                 3 
                 4 
               
               
                   
                   
                 Value &lt; Upper index 
                   
                   
               
               
                   
                   
                 Strike 
                   
                   
               
               
                   
                 3 
                 Interest Rate = 10 
                 0 
                 0 
               
               
                   
                 4 
                 Interest Rate = 5 
                 0 
                 0 
               
               
                   
                   
               
            
           
         
       
     
     In this case the success step is to pay interest at 10% and failure step is to pay interest at 5%. Success step&#39;s expression is executed next if the current step&#39;s expression returns success. Failure step&#39;s expression is executed next if the current step&#39;s expression returns Failure. If the lower index strike defined at the financial product is 4500 and the upper index strike defined at the financial product is 5000 and at the time of cash flow event calculation if the spot price index value is 4800, then a customer would get 10% enhanced interest on his investment. 
     An exemplary expression of defining the one or more principal rules and their execution may be as follows: 
     
       
         
           
               
               
             
               
                   
                   
               
             
            
               
                   
                 If Spot price value &gt;= Lower Equity Strike 
               
               
                   
                 Payment Mode = Cash 
               
               
                   
                 Else 
               
               
                   
                 Payment Mode = Equity 
               
               
                   
                   
               
            
           
         
       
     
     The above rule is defined in the system using the steps: 
     
       
         
           
               
               
               
               
               
             
               
                   
                   
               
               
                   
                 Step No. 
                 Expression 
                 Success Step 
                 Failure Step 
               
               
                   
                   
               
             
            
               
                   
                 1 
                 Spot price value &gt; =  
                 2 
                 3 
               
               
                   
                   
                 Lower Equity Strike 
                   
                   
               
               
                   
                 2 
                 Payment Mode = 
                 0 
                 0 
               
               
                   
                   
                 Cash 
                   
                   
               
               
                   
                 3 
                 Payment Mode = 
                 0 
                 0 
               
               
                   
                   
                 Equity 
               
               
                   
                   
               
            
           
         
       
     
     In this case the success step is to pay cash and failure step is to pay equity. If the lower equity strike defined at the financial product is 2200 and the time of cash flow event calculation the spot price value is 2100, then the customer would get the payment in equity (shares). 
     Similarly, an exemplary expression of defining the one or more currency rules and their execution may be as follows: 
     
       
         
           
               
               
             
               
                   
                   
               
             
            
               
                   
                 If Spot price FX Rate &lt;= Lower FX Strike 
               
               
                   
                 Payment CCY = Product CCY 
               
               
                   
                 Else 
               
               
                   
                 Payment CCY = Underlying CCY 
               
               
                   
                   
               
            
           
         
       
     
     The above rule will be defined in the system using the steps: 
     
       
         
           
               
               
               
               
             
               
                   
               
               
                 Step No. 
                 Expression 
                 Success Step 
                 Failure Step 
               
               
                   
               
             
            
               
                 1 
                 Spot price FX Rate &lt;=  
                 2 
                 3 
               
               
                   
                 Lower FX Strike 
                   
                   
               
               
                 2 
                 Payment CCY = 
                 0 
                 0 
               
               
                   
                 Product CCY 
                   
                   
               
               
                 3 
                 Payment CCY = 
                 0 
                 0 
               
               
                   
                 Underlying CCY 
               
               
                   
               
            
           
         
       
     
     In this case the success step is the product CCY and failure step is the underlying CCY. If product FX strike defined at the financial product is 50 and if product CCY is INR and underlying CCY is USD, and if at the time of the cash flow event calculation, the Spot FX Strike is 52, then the customer would get payment in USD currency. 
     The above mentioned description is presented to enable a person of ordinary skill in the art to make and use the invention and is provided in the context of the requirement for obtaining a patent. Various modifications to the preferred embodiment will be readily apparent to those skilled in the art and the generic principles of the present invention may be applied to other embodiments, and some features of the present invention may be used without the corresponding use of other features. Accordingly, the present invention is not intended to be limited to the embodiment shown but is to be accorded the widest scope consistent with the principles and features described herein.