Patent Abstract:
It is an object of the invention to provide systems and methods for creating or developing, issuing, and servicing or maintaining convertible or exchangeable financial instruments. These convertible or exchangeable financial instruments are created by a building block approach, whereby new financial instruments can be generated and evaluated prior to issuance. In other embodiments, a user will be able to employ the systems and methods for origination, testing, issuance or sale, marketing, trading, hedging, risk management and regulation of convertible or exchangeable financial instruments.

Full Description:
CROSS REFERENCE TO RELATED APPLICATION  
         [0001]    This claims the benefit of U.S. Provisional Patent Application Nos. 60/311,516 and 60/311,574, filed Aug. 10, 2001, which are hereby incorporated by reference in their entireties.  
         BACKGROUND OF THE INVENTION  
         [0002]    This invention relates to systems and methods for creating, issuing, servicing, or maintaining convertible and exchangeable financial instruments (e.g., debt instruments, preferred instruments, trust preferred instruments, warrants, certain insurance contracts, and suitable derivatives thereof, or any security backed by any of the above) and computer-based user interfaces therefor.  
           [0003]    A convertible financial instrument, which may be converted in to something of value (e.g., common stock), may be referenced throughout this application. The scope of this invention also includes exchangeable financial instruments, which may be exchanged for something of value.  
           [0004]    Systems and methods utilized for origination, sales, marketing, trading, hedging, risk management, and regulatory purposes often require major enhancements to adapt to innovations in financial instruments. Currently, when a new financial instrument is brought to market, a new model must be generated and existing software may require enhancements or revisions. Generation of a new model and revisions of software are often costly and not practical because they result in delay between inventing a new financial instrument and bringing the financial instrument to market.  
           [0005]    The ability to efficiently bring innovative financial instruments to market is necessary to remain competitive in the sale of financial instruments. A system and method for creating and testing new financial instruments that provides a user with the flexibility to customize financial instruments would be advantageous for two reasons. First, the high cost of adapting systems and methods for origination, testing, issuance or sale, marketing, trading, hedging, risk management and regulation of innovative financial instruments makes the creation of new financial instruments cost prohibitive. Second, because time is of the essence, the traditional delays associated with creating new financial instruments and associated with adapting systems and methods to new financial instruments, which exist between the creation of new financial instruments and actually bringing the new financial instrument to market, render the existing models or calculators and associated systems impractical for use in bringing new financial instruments to the market.  
           [0006]    It would be desirable and advantageous to have the ability to create and test innovative financial instruments, without the traditional delays and associated costs. It would also be desirable to provide a system and method to allow users to experiment with new product ideas, by allowing the user an opportunity to evaluate the financial instrument prior to issuance.  
         SUMMARY OF THE INVENTION  
         [0007]    It is an object of the invention to provide the ability to create and test innovative financial instruments, without the traditional delays and associated costs, and to provide a system and method to allow users to experiment with new product ideas, by allowing them an opportunity to evaluate the financial instrument prior to issuance.  
           [0008]    The present invention provides systems and methods for creating (including testing and evaluating), issuing (including offering and selling, and servicing or maintaining convertible or exchangeable financial instruments. These financial instruments are created by a “building block approach”, which allows a user to build a financial instrument by selecting specific objects and features, and then providing the specific inputs for each selected feature. The invention further provides a user with the ability to experiment by selecting and re-selecting desired objects and/or features of a new financial instruments. Specifically the model/calculator and system of this invention allow flexibility by providing a user the opportunity to select the desired objects and state the features of each desired object. The benefit of the flexible model/calculator and associated system, of this invention, is that a user can simulate, generate and evaluate new financial instruments without creating a new model/computer and system for each new financial instrument. This invention allows capital markets to experiment with new product ideas in an affordable and time-effective manner and minimize time period between the creation of a new financial instrument and the marketing of the new financial instrument.  
           [0009]    In some embodiments, a user preferably will be able to use the systems and methods for the origination, testing, issuance or sale, marketing, trading, hedging, risk management and regulation of convertible or exchangeable financial instruments.  
           [0010]    In some embodiments, the convertible or exchangeable financial instruments may be based on, for example, long-term zero coupon notes (e.g., those sold by Merrill Lynch and Company, Inc. under the trademark Liquid Yield Option Notes or LYONs), cash pay or partial cash pay convertible or exchangeable bonds issued at a discount, debt instruments, preferred instruments, trust preferred instruments, warrants, certain insurance contracts, suitable derivatives thereof, or any security backed by any of the above. 
       
    
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0011]    The above and other objects and advantages of the invention will be apparent upon consideration of the following detailed description, taken in conjunction with the accompanying drawings, in which like reference characters refer to like parts throughout, and in which:  
         [0012]    [0012]FIG. 1 is illustrative of the information flow for: (1) developing and testing a financial instrument, (2) issuing a financial instrument, and (3) servicing and maintaining a financial instrument.  
         [0013]    [0013]FIG. 2 illustrates some preferred embodiments of the method according to the invention to develop or create a convertible or exchangeable instrument financial instrument in accordance with the present invention;  
         [0014]    [0014]FIG. 3 illustrates some preferred embodiments of the method according to the invention to issue or pricing a convertible or exchangeable financial instrument in accordance with the present invention;  
         [0015]    [0015]FIG. 4 illustrates some preferred embodiments of the method according to the invention to service or maintain convertible or exchangeable financial instrument in accordance with the present invention;  
         [0016]    [0016]FIG. 5 shows preferred screen shots and flow of information in a system where a user selected the Redemption Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0017]    [0017]FIG. 6 shows preferred screen shots and flow of information in a system where a user selected the Cash Flow Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0018]    [0018]FIG. 7 shows preferred screen shots and flow of information in a system where a user selected the Model Parameters Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0019]    [0019]FIG. 8 shows preferred screen shots and flow of information in a system where a user selected the Conversion Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0020]    [0020]FIG. 9 shows preferred screen shots and flow of information in a system where a user selected the Holder&#39;s Put Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0021]    [0021]FIG. 10 shows preferred screen shots and flow of information in a system where a user selected the Issuer Call Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0022]    [0022]FIG. 11 shows preferred screen shots and flow of information in a system where a user selected the Issue Terms Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0023]    [0023]FIG. 12 shows preferred screen shots and flow of information in a system where a user selected the Bankruptcy Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0024]    [0024]FIG. 13 shows preferred screen shots and flow of information in a system where a user selected the Accretion Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0025]    [0025]FIG. 14 shows preferred screen shots and flow of information in a system where a user selected the Contingent Payment (“CoPa”) Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0026]    [0026]FIG. 15 shows preferred screen shots and flow of information in a system where a user selected the Contingent Conversion (“CoCo”) Object as illustrated at step  202  in FIG. 2, step  304  in FIG. 3, or step  404  in FIG. 4;  
         [0027]    [0027]FIG. 16 is a cross-sectional view of a magnetic data storage medium encoded with a set of machine-executable instructions for performing the method in accordance with the present invention; and  
         [0028]    [0028]FIG. 17 is a cross-sectional view of an optically readable data storage medium encoded with a set of machine executable instructions for performing the method in accordance with the present invention. 
     
    
     DETAILED DESCRIPTION OF THE INVENTION  
       [0029]    The present invention allows users to not only create and test innovative financial instruments, without having the traditional delays and associated costs, but also provides a system and method that allows users to evaluate the financial instrument prior to issuance.  
         [0030]    In accordance with the present invention, a model/calculator and associated system allows capital markets to experiment with new product ideas in a cost effective and timely manner. More particularly, the delay between creation of a new financial instrument and bringing the new financial instrument to market is minimized to make the creation of new convertible or exchangeable financial instruments feasible. For example, in addition to allowing creation of completely new financial instruments, the model/calculator and associated system of this invention allow a user to add additional objects and/or features to pre-existing financial instrument (i.e., financial instruments are “flexible” or “extendable”) in order to create a new financial instrument.  
         [0031]    The generation of “flexible” or “extendable” financial instruments is accomplished by representing all elements of convertible and exchangeable financial instruments in a generic form—i.e., as objects or features. By representing all objects and features in a generic form a user may use a “building block approach” to construct and test new financial instruments. This building block approach provides a user with the ability to build a financial instrument by selecting any number and/or combination of objects, and then selecting the specific features for each object selected.  
         [0032]    The building block approach also allows a user to re-select or de-select specific features. In some embodiments, a user may enter specific inputs, in order to create a customized convertible financial instrument. Additionally, some embodiments may provide a database and rules engine containing all objects of a new financial instrument, allowing for evaluation and continued management of a new financial instrument in a time-effective and cost-efficient manner. A database design and maintenance application preferably will use a building block approach as described in the model/calculator and interface system, allowing extendability to the financial instrument and allowing for a timely introduction of a new financial instrument into the market.  
         [0033]    In some embodiments of this invention a model/calculator and interface preferably will allow an issuer to create a new type of convertible or exchangeable financial instrument. In some embodiments, the application and model/calculator are easily extendable and may provide convertible and exchangeable features as an object. For example, a Conversion object may be selected and the input information may allow construction of a conversion payoff as a function of underlying stock price and time. Some examples of additional objects for selection and input include: Redemption, Issuer Call Terms, Cash Flow, Credit, Model Parameters, Holder&#39;s Put, Bankruptcy, Accretion, Contingent Payment (“CoPa”), Contingent Conversion (“CoCo”), and Issue Terms. Bankruptcy protection is similarly represented in a generic form as a Bankruptcy object. In some embodiments, a bankruptcy object may provide inputs related to bankruptcy protection, cash flow protection, and principal protection. The inventor of a financial instrument may use a building block approach to construct and test new financial instruments by selecting one or more objects, and entering specific inputs for each selected object.  
         [0034]    In some embodiments, the model/calculator and system are capable of processing large numbers of model/calculator inputs and combinations of objects and inputs using a spreadsheet interface program. In this system, objects are used to compartmentalize inputs. Examples of objects include: Redemption (i.e., expiration and return of principal), Cash Flow (i.e., coupons or dividends), Conversion (i.e., Holder&#39;s option to convert or exchange the instrument into an underlying asset), Issuer Call Terms (i.e., Issuer&#39;s option for an early redemption), Holder&#39;s Put (i.e., Holder&#39;s option for an early redemption), Credit, Issue Terms, Bankruptcy, Accretion, Contingent Payment (“CoPa”), Contingent Conversion (“CoCo”), and Model Parameters. Additionally a Call Delay and a Convertible Bond Option (“CBO”) object may be selected. Each object is run as a separate function through a Risk Analysis and Management system.  
         [0035]    Also, two adaptable model/calculator applications may be available. One application is a simple application, which does not require identification of an underlying object. A second more advanced application is identical to the simple application, but requires a user designates at least one underlying object. Some examples of a underlying object include a stock, an index or a basket of stocks.  
         [0036]    Some examples of types of data that may be calculated by the model/calculator for future use by the model/calculator include: accrued interest, cash flows, accreted value, call price and provisional trigger, put price, convertible bond option strike and reference strike data.  
         [0037]    In some embodiments, the same application and model/calculator are used for convertible bond options and convertible or exchangeable instruments. More specifically, convertible or exchangeable bond options and convertible or exchangeable instruments preferably will be calculated simultaneously and both sets of results may be displayed at the same time. For example, the convertible or exchangeable bond object simply passes as an argument to the convertible or exchangeable model/calculator along with the other convertible or exchangeable model/calculator inputs.  
         [0038]    In some embodiments, short cuts may be used to create objects. For example, number of shares may be used in place of a conversion object or maturity date may be used in place of a redemption object or repurchase spread may be used in place of a convertible or exchangeable bond option object.  
         [0039]    In some embodiments, the objects may allow a user the flexibility of creating sample spread sheets for financial instruments.  
         [0040]    In some embodiments, a user is allowed to display only relevant information with respect to a new financial instrument.  
         [0041]    The convertible or exchangeable model/calculator may also be used to cut and paste from example spreadsheets of detailed quantitative analysis.  
         [0042]    In some embodiments, a database and maintenance application, which preferably will contain all objects, allows for evaluation and continued management of a new financial instrument in a time-effective and cost-efficient manner. The database design and maintenance application uses the same building block approach described in the model/calculator and interface system. This type of application allows a pre-existing financial instrument the flexibility to be modified through the addition of new objects and/or re-selection of features without the need to create a whole new model. The ability to create and test new financial instruments by simply modifying an already financial instrument allows for a timely introduction of a new financial instrument into the market.  
         [0043]    In some embodiments, a rules engine maintains objects and inputs of newly created convertible or exchangeable financial instruments, allowing a user an opportunity to evaluate and manage a new financial instrument in the after market. In some embodiments, a rules engine utilizes financial instrument features from several sources (i.e., internal or external financial sources) that may be normalized into a generic representation and analyzed to facilitate the ongoing maintenance (i.e., quality control and/or check of regular schedules) of the aforementioned database. This ability to conduct continued servicing provides a further advantage to a user by allowing the user to re-call, from a rules engine, an already created and issued financial instrument and adjust the terms of the financial instrument to include the desired inputs for each selected object and/or feature.  
         [0044]    In accordance with some embodiments of this invention, a user may select the results he or she may want to calculate and display by using a result object. A result object allows customization of the output data. More particularly, a true or false entry is selected from a pull-down menu for specific result outputs. Some result outputs include: Value, Raw Data, Raw Gamma, Pty Delta, Pty Gamma, Theta, “Vega” —the difference in value of a +1% shift in volatility, “Rho” —the difference in value for a +10 bp shift in the yield curve, “Credit Risk” —difference in value for a +10 bp shift in the credit curve, Convertible Bond Strike, Calibrated Volatility, “Straight Bond Value” —the value of a CVT without the right to convert into stock, but with issuer call and puts taken into account, and Risk “Neutral Average Life” —the probability weighted duration of the CVT taking into account maturity, issuer call, put and conversion. Additionally, in some embodiments, Convertible Bond Strike or “asset swap bond floor” are only returned when convertible or exchangeable bond option terms are specified, and when the Calibrated Volatility is TRUE, the input volatility is risk free and volatility is downward adjusted to compensate for credit. The Calibrated Volatility result is only returned when designated as TRUE.  
         [0045]    Additionally, a user may request that results be displayed in a specific format. For example, a user may designate column labels and an optional third column to display the Convertible Bond Option (“CBO”) using a TRUE/FALSE pull-down menu. Generally, selection of the TRUE pull-down preferably will display the entry for that particular result object, and a selection of the FALSE pull-down will result in no display for that particular result object. Results may be displayed in a one, two or three column format. For example, when the pull-down for “Label Column” is marked as TRUE, the first column provides labels corresponding to the CVT data displayed in column two. When the pull-down for “CBO Column” is marked as TRUE, the CBO results appear in a third column, however, when the “CBO Column” is marked as FALSE, the CBO results may appear in the second column along with the CVT results.  
         [0046]    Systems and methods for creating, simulating, testing, generating, servicing and/or maintaining innovative financial instruments in accordance with the present invention may be described in conjunction with FIGS.  1 - 13 .  
         [0047]    [0047]FIG. 1 is illustrative of the information flow in a system  100  for creating, simulating and testing a financial instrument by a user  102 , issuing a financial instrument by a user  103 , and servicing and maintaining a financial instrument by a user  105 . The flow of information begins with a user  102 ,  103  or  105  selecting the desired inputs, via systems  200 ,  300 , or  400  (as illustrated in FIGS.  2 - 4 ), and sending input information to the central processing unit (“CPU”)  101  for processing. Processing of input is accomplished at the calculation unit  106 . Calculated results are returned to the CPU for further processing or storage of the financial instrument or output. Following completion of processing by the CPU  101 , the structure of the financial instrument or output may be stored for later retrieval. Upon a decision to store the structure of the financial instrument or output, a user may store the information (i.e., structure or output of financial instrument) financial instrument on a database  107  or at the rules engine  104 . Upon a decision to further process stored input or modify a financial instrument, the stored input or financial instrument may be retrieved from the database  107  or rules engine  104 .  
         [0048]    [0048]FIG. 2 shows some preferred embodiments of the method according to the invention to create or simulate a convertible or exchangeable financial instrument. The method starts at step  201  where a user, or other entity, creates or simulates a convertible or exchangeable financial instrument. In doing so, a user preferably will begin by opening a spread sheet at step  201 . The method then proceeds to step  202 , where a user selects various input objects from a list of selected objects. Selected objects may include: Redemption, Cash Flow, Credit, Model Parameters, Holder&#39;s Put, Issuer Call Terms, Conversion, Bankruptcy, Accretion, Contingent Payment, Contingent Conversion, or Issue Terms. Next, at step  203 , the issuer provides specific inputs for each of the selected objects. The input may be entered, e.g., using an alpha-numeric keyboard. The method then proceeds to step  204 , where the input is processed via the system. Next, at step  205 , the issuer has the opportunity to review the data generated by the new convertible or exchangeable financial instrument as Output. Following review of the Output at step  205 , the issuer has the option at step  206  to store the financial instrument in a database at  207  or re-select objects or modify inputs at step  209 . If the issuer elects to store the financial instrument the financial instrument may be stored in a computer database at step  207 . Following storage of the financial instrument at step  207 , the program completes at step  208 . In the event that a user declines to store the financial instrument at step  206 , the issuer may elect to re-select objects or modify inputs at step  209 . Upon a decision to re-select objects at step  209 , the issuer re-enters the above-described system at step  202  and proceeds through steps  203  to  206  with respect to the re-select objects, which were entered in step  202 . Upon a decision to modify inputs at step  209 , the issuer re-enters the above-described system at step  203  and proceeds through steps  204  to  206  with respect to the modified inputs, which were entered in step  203 .  
         [0049]    [0049]FIG. 3 shows some preferred embodiments of the method according to the invention to issue a convertible or exchangeable financial instrument. The method starts at step  301  where a user, or other entity, decides to issue a convertible or exchangeable financial instrument. In doing so, a user may begin by opening a spread sheet at step  301 . The method then proceeds to step  302 , where a user may elect to load a financial instrument or open an existing financial instrument. Next, at step  303 , the issuer may elect to load an underlying financial instrument. A user then proceeds to step  304 , where a user selects various input objects from a list of selected objects. Selected objects may include: Redemption, Cash Flow, Credit, Model Parameters, Holder&#39;s Put, Issuer Call Terms, Conversion, Bankruptcy, Accretion, Contingent Payment, Contingent Conversion, or Issue Terms. Next, at step  305 , the issuer provides specific inputs for each of the selected objects. The input may be entered, e.g., using an alpha-numeric keyboard. The method proceeds to step  306  to where the input is processed via the system. At step  307 , the issuer has the opportunity to review the output of the new convertible or exchangeable financial instrument. Following review of the output  307 , the issuer has the option at step  308  to store the financial instrument. If the issuer elects to store the instrument at step  308 , a user proceeds to step  309 . At step  309 , the stored instrument may be printed as a hard copy, stored via e-mail or stored to a disk (e.g., floppy disk or hard drive). In the event that a user would like to make additional changes to the financial instrument, before saving the financial instrument, the issuer proceeds to step  310 , where a user may begin again or end the program. Upon selection of begin again at step  310 , the issuer proceeds to step  312 , which allows a user to select a new financial instrument or re-select objects or modify input. Upon a decision to select a new financial instrument at step  312 , a user re-enters the above-described system at step  302  and proceeds through steps  303  to  308  with respect to the new financial instrument, which was selected in step  302 . Upon a decision to re-select objects at step  312 , a user re-enters the above-described system at step  304  and proceeds through steps  305  to  308  with respect to the re-select objects, which were selected in step  304 . Upon selection of modify input at step  312 , a user re-enters the above-detailed system at step  305  and proceeds through steps  306  to  308  employing the modified input, which was entered in step  305 . Upon selection of end at step  310 , the program completes at  311 .  
         [0050]    [0050]FIG. 4 shows some preferred embodiments of the method according to the invention to service or maintain a convertible or exchangeable financial instrument. The method starts at step  401  where a user, or other entity, decides to service or maintain a convertible or exchangeable financial instrument. In doing so, a user may begin by opening a spread sheet at step  401 . The method then proceeds to step  402 , where a user may elect to load a financial instrument or open an existing financial instrument. Next, at step  403 , the issuer may elect to load an underlying financial instrument. A user then proceeds to step  404 , where a user selects various input objects from a list of selected objects. Selected objects may include: Redemption, Cash Flow, Credit, Model Parameters, Holder&#39;s Put, Issuer Terms, Conversion, ID&#39;s &amp; Tranches, Notes, Bankruptcy, Accretion, Contingent Payment, and Contingent Conversion. Next, at step  405 , the issuer provides specific inputs for each of the selected objects. The input may be entered using an alpha-numeric keyboard. The method proceeds to step  406  to where the input is processed via the system. At step  407 , the user has the opportunity to review the Output of the serviced or maintained financial instrument. Following review of the Output at step  407 , the issuer has the option at step  408  to store the Output of the serviced or maintained financial instrument. If the issuer elects to store the Output at step  408 , the user proceeds to step  409 . At step  409 , the Output of the serviced or maintained financial instrument may be printed as a hard copy, stored via e-mail or stored to a disk (e.g., floppy disk or hard drive). In the event that a user declines to store the Output at step  408 , the issuer proceeds to step  410 , where a user may begin again or end the program. Upon selection at step  410  of begin again, the issuer proceeds to step  412 , which allows a user to select a new financial instrument or re-select objects or modify input. Upon a decision to select a new financial instrument at step  412 , a user re-enters the above-described system at step  402  and proceeds through steps  403  to  408  with respect to the new financial instrument, which was selected in step  402 . Upon a decision to re-select objects at step  412 , a user re-enters the above-described system at step  404  and proceeds through steps  405  to  408  with respect to the re-select objects, which were selected in step  404 . Upon selection of modify input at step  412 , a user re-enters the above-described system at step  405  and proceeds through steps  406  to  408  with respect to the modified input, which was entered in step  405 . Upon selection of end at step  410 , the program completes at  411 .  
         [0051]    [0051]FIG. 5 shows preferred screen shots and flow of information in a system  500  for the Redemption Object of this invention. A creator who creates, simulates or generates a financial instrument with a Redemption object at step  202  in FIG. 2, an issuer issuing a financial instrument with a Redemption Object at step  304  in FIG. 3, or a user who service or maintains a financial instrument using a Redemption Object at step  404  in FIG. 4, may select from a list of Redemption features at step  501 . Redemption features may include: Amount  502 , Contingent Principal Value (“CPV”)  503 , Mandatory  504 , Par  505 , Local Currency  506 , Percent of Par  507  or Perpetual  508 . Upon selection of Amount  502  a user preferably will be provided with a list of appropriate inputs corresponding to the Amount. The list of Amount  502  inputs may include amount and maturity date. Upon selection of CPV  503  a user preferably will be provided with a list of appropriate inputs corresponding to the CPV. The list of CPV  503  inputs may include: Current CPV, Contract Annual Dividends and Maturity. Upon selection of Mandatory  504  a user preferably will be provided with a list of appropriate inputs corresponding to the Mandatory. The list of Mandatory  504  inputs may include: Maturity. Upon selection of Par  505  a user preferably will be provided with a list of appropriate inputs corresponding to the Par. The list of Par  505  inputs may include: Maturity. Upon selection of Local Currency  506  a user preferably will be provided with a list of appropriate inputs corresponding to the Local Currency. The list of Local Currency  506  inputs may include: Amount and Maturity. Upon selection of Percent of Par  507  a user preferably will be provided with a list of appropriate inputs corresponding to the Percent of Par. The list of Percent of Par  507  inputs may include: % of Par and Maturity. The actual Redemption amount input may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0052]    [0052]FIG. 6 shows preferred screen shots and flow of information in a system  600  for the Cash Flow Object of this invention. A creator who creates, simulates or generates a financial instrument with a Cash Flow Object, at step  202  in FIG. 2, an issuer who issues a financial instrument containing a Cash Flow Object at step  304  in FIG. 3, or a user who service or maintains a financial instrument using a Cash Flow Object at step  404  in FIG. 4, may select from a list of Cash Flow features at step  601 . Cash Flow features may include: Annual Amount  602 , Annual Rate  603 , Arbitrary Schedule  604 , Floating Rate  605 , Step-Up Schedule  606 , and Zero  607 . Upon selection of Annual Amount a user preferably will be provided with a list of appropriate inputs corresponding to the Annual Amount at step  602 . The list of Annual Amount inputs, at step  602 , may include: Annual Amount, Day Count, Frequency, Interest Accrued, 1stCashFlow, and Pay In Kind. Upon selection of Annual Rate at step  603  a user preferably will be provided with a list of appropriate inputs corresponding to the Annual Rate. The list of Annual Rate inputs may include: Annual Rate, Day Count, Frequency, Interest Accrued, and 1stCashFlow. Upon selection of Arbitrary Schedule at step  604  a user preferably will be provided with a list of appropriate inputs corresponding to the Arbitrary Schedule. At step  604 , the list of Arbitrary Schedule inputs may include: Interest Accrued. Upon selection of Floating Rate at step  605 , the user preferably is provided with a list of appropriate inputs corresponding to the Floating Rate. The list of Floating Rate inputs, at step  605  may include: Current Rate, Spread, Day Count, Frequency, Interest Accrued, and 1stCashFlow. Upon selection of Step-Up Schedule  606  a user preferably will be provided with a list of appropriate inputs corresponding to the Step-Up Schedule. At step  606  the list of Step-Up Schedule inputs may include: Day Count, Frequency, Interest Accrued, and 1 st  Cash Flow. The actual Cash Flow input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0053]    [0053]FIG. 7 shows preferred screen shots and flow of information in a system  700  for the Model Parameters Object of this invention. A creator who creates, simulates or generates a financial instrument containing a Model Parameters Object at step  202  in FIG. 2, an issuer who issues a financial instrument containing a Model Parameters Object at step  304  in FIG. 3, or a user who service or maintains a financial instrument using a Model Parameters Object at step  404  in FIG. 4, may select from various Model Parameters inputs  700 . Model Parameters inputs may include: Override Model Default  701 , For Volatility  702 , and Credit Elasticity  703 . Upon selection of Override Model Default at step  701 , the user preferably is provided with a list of appropriate inputs corresponding to the Override Model Default. The list of Override Model Default inputs includes: J steps, Time Steps, X steps and Override Model. Upon selection of For Volatility, at step  702 , the user preferably is provided with a list of appropriate inputs corresponding to the For Volatility. The list of For Volatility inputs may include: Workout Date and workout Payment. Upon selection of Credit Elasticity, at step  703 , the user preferably is provided with a list of appropriate inputs corresponding to the Credit Elasticity. The list of Credit Elasticity inputs includes: Override. The actual Model Parameters input may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0054]    [0054]FIG. 8 shows preferred screen shots and flow of information in a system  800  for the Conversion Object of this invention. A creator who creates, simulates or generates a financial instrument with a Conversion Object at step  202  in FIG. 2, an issuer who issues a financial instrument with a Conversion Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using a Conversion Object at step  404  in FIG. 4, may select from a list of Conversion features, at step  801 . Conversion inputs may include: Capped, Date Schedule, None, Types of Instrument (e.g., PRIDES, PRIZES, etc.), Ratio, and Schedule. Upon selection of Capped, at step  802 , the user preferably is provided with a list of appropriate inputs corresponding to the Capped conversion. At step  802  the list of Capped inputs includes: Ratio, Begins, Conversion Cap, Exchangeable Type, Cash and Ends. Upon selection of Date Schedule, at step  803 , the user preferably is provided with a list of appropriate inputs corresponding to the Date Schedule. The list of Date Schedule inputs includes: Date Stock Ratio Cash. Upon selection of the type of instrument at step  805 , the user preferably is provided with a list of appropriate inputs corresponding to the Types of Instrument (e.g., PRIDES, PRIZES, etc.). The list of PRIDES inputs includes: Minimum Ratio, Optional Begins, Maximum Ratio, Exchangeable Type, Minimum Cash and Maximum Cash. Upon selection of PRIDES, at step  806 , the user preferably is provided with a list of appropriate inputs corresponding to the Ratio. The list of Ratio inputs includes: Ratio, Begins, Conversion Cap, Exchangeable Type, Cash and Ends. The list of Schedule inputs may include: Date Stock Ratio Cash. The actual Conversion input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu presents input options for a user to select a desired input.  
         [0055]    [0055]FIG. 9 shows preferred screen shots and flow of information in a system  900  for the Holder&#39;s Put Object of this invention. A creator who creates, simulates or generates a financial instrument with a Holder&#39;s Put Object at step  202  in FIG. 2, an issuer who issues a financial instrument with a Holder&#39;s Put Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using a Holder&#39;s Put Object at step  404  in FIG. 4, selects from various Holder&#39;s Put features. Holder&#39;s Put features include: Put Type  901  and Put Type with Puts in Under Currency (“Und Currency”)  902 . Upon selection of Put Type (i.e., Accreted, Price, % of Par, or None), at step  901 , the user preferably is provided with a Put Schedule, including a list of appropriate inputs corresponding to the Put Schedule. The Put Schedule inputs include: Put Date and Price. Upon selection of Put Type with Puts in Under Currency, at step  902 , the user preferably is provided with a true/false option for selecting Puts in Und Currency at step  902 . Upon the selection of true or false for Puts in Und Currency, the user preferably is provided with a Put Schedule, including a list of appropriate inputs corresponding to the Put Schedule. The Put Schedule inputs may include: Put Date and Price. The actual Conversion input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0056]    [0056]FIG. 10 shows preferred screen shots and flow of information in a system  1000  for the Issuer Call Term Object of this invention. A creator who creates, simulates or generates a financial instrument with an Issuer Call Term Object at step  202  in FIG. 2, an issuer who issues a financial instrument with an Issuer Call Term Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using an Issuer Call Term Object at step  404  in FIG. 4, may select from a list of Issuer Call Terms features. Issuer Call Terms features include: None, Price, Accreted Value, Contingent Principal Value (“CPV”), or % of Par. If a user declines to select an issuer call price (i.e., None), at step  1001 , the user preferably is provided with a Issuer Call Schedule, including a list of input options such as: Issuer Call Notice, Conversion Expires Days Prior, Provisional Type, Provisional Test # Days Required or Provisional Test # Days Satisfied. Upon selection of Issuer Call type (i.e., Price, CPV, Accreted Value or % of Par), at step  1002 , the user preferably is provided with a Issuer Call Schedule, including a list of input options such as: Issuer Call Notice, Conversion Expires Days Prior, Provisional Type, Provisional Test # Days Required, or Provisional Test # Days Satisfied. The actual Issuer Call Term input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0057]    [0057]FIG. 11 shows preferred screen shots and flow of information in a system  1100  for the Issue Term Object of this invention. A creator who creates, simulates or generates a financial instrument with an Issue Terms Object at  202  in FIG. 2, an issuer who issues a financial instrument with an Issue Term Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using an Issue Terms Object at step  404  in FIG. 4 may select from a list of Issue Terms inputs. Issue Terms inputs may include: Issue Terms  1101 , Ratings  1102 , Trade Date  1103  and Was Called  1104 . Upon selection of Issue Terms  1101 , the user preferably is provided with a list of appropriate inputs corresponding to the Issue Terms. The list of Issue Terms may include: Announce Date, 1 st  Settle Date, Amount Issued, Amount Outstanding, Underwriter, Issuer Price, Issue Yield, Premium, and Issue FX Rate. Upon selection of Ratings, at step  1102 , the user preferably is provided with a list of appropriate inputs corresponding to the Ratings. The list of Rating  1102  inputs include: S&amp;P Ratings, Moody Ratings and ML Ratings. Upon selection of Trade Date, at step  1103 , the user preferably is provided with a list of appropriate inputs corresponding to the Trade Date. The list of inputs, at step  1103 , may include: Settle Offset, Minimum Trade Amount, Trade Increment, Withhold Tax and Legacy Face Amount. Upon selection of Was Called, at step  1104 , the user preferably is provided with a true/false option for selecting Was Called. The actual Conversion input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0058]    [0058]FIG. 12 shows preferred screen shots and flow of information in a system  1200  for the Bankruptcy Object of this invention. A creator who creates, simulates or generates a financial instrument with a Issue Terms Object at  202  in FIG. 2, an issuer who issues a financial instrument with a Bankruptcy Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using a Bankruptcy Object at step  404  in FIG. 4, may select from a list of Bankruptcy features. Bankruptcy inputs may include: Cash Flow Protection  1202 , Cash Flow Protection Start Date and % Protected  1203 , Principal Protection  1204 , and Principal Protection Start Date and % Protected  1205 . Upon selection of Cash Flow Protection  1202 , the user preferably is provided with True or False option. More particularly, a true or false entry is selected from a pull-down menu for specific result outputs. Upon selection of “True” at step  1202 , the user preferably is provided with Cash Flow Protection Start Date and % Protected  1203 . At step  1203 , the user preferably is provided an input cell for entry of cash flow start dates and % protected. At Principal Protection step  1204 , the user preferably is provided with True or False option. More particularly, a true or false entry is selected from a pull-down menu for specific result outputs. Upon selection of “True” at step  1204 , the user preferably is provided with Principal Protection Start Date, and % protected, at step  1205 . The actual Bankruptcy input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0059]    [0059]FIG. 13 shows preferred screen shots and flow of information in a system  1300  for the Accretion Object of this invention. A creator who creates, simulates or generates a financial instrument with an Accretion Object at  202  in FIG. 2, an issuer who issues a financial instrument with an Accretion Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using an Accretion Object at step  404  in FIG. 4, may select from a list of Accretion features. Upon selection of Accreted Value  1301 ,  1302 , and  1303 , the user preferably is provided with a drop down menu with options that preferably include: Standard  1301 , Straight-line  1302 , and Floating  1303 . Upon selection of Standard at step  1301 , Straight-line at step  1302 , and Floating at  1303 , the user preferably is provided with a list of appropriate inputs corresponding to the accretion type. That is, at step  1301 , the user preferably is provided with inputs for accretion yield, accretion day count, accretion frequency, accretion workout date, and accretion workout price. At step  1302 , the user preferably is provided with inputs for accretion yield, accretion day count, accretion workout date, and accretion workout price. At step  1303 , the user preferably is provided with inputs for accretion spread, accretion day count, accretion frequency, accretion initial price, accretion rate floor, accretion rate cap, reset date and LIBOR. The actual Accretion input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0060]    [0060]FIG. 14 shows preferred screen shots and flow of information in a system  1400  for the Contingent Payment (“CoPa”) Object of this invention. A creator who creates, simulates or generates a financial instrument with a Contingent Payment Object at  202  in FIG. 2, an issuer who issues a financial instrument with a Contingent Payment Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using a Contingent Payment Object at step  404  in FIG. 4, may select from a list of Contingent Payment Object features, at step  1401 . Contingent Payment features may include: CoPa Trigger Type, CoPa Trigger Direction, CoPa Interpolate Trigger, CoPa Current Period, CoPa Payment Type, CoPa Payment Type A, and CoPa Payment Type B. Contingent payment triggers may be specified using provisional call trigger types, and contingencies may be satisfied either above or below the trigger. Trigger levels may be constant or interpolated. Upon selection of CoPa Payment Type, the user preferably is provided with a list of appropriate inputs corresponding to the CoPa Payment Type. The list of CoPa Payment Type may include: Type A, Type B, Max A and B, Min A and B, or Sum A and B. The user may also select from a list of appropriate inputs corresponding payment calculation. The list of payment calculation choices may include: Under Dividends, Parity, Market Price, and Accreted Value. The actual Contingent Payment input values may be entered using an input device including an alpha-numerical key pad. Alternatively a drop-down menu may present input options for a user to select a desired input.  
         [0061]    [0061]FIG. 15 shows preferred screen shots and flow of information in a system  1500  for the Contingent Conversion (“CoCo”) Object of this invention. A creator who creates, simulates or generates a financial instrument with a Contingent Conversion Object at  202  in FIG. 2, an issuer who issues a financial instrument with a Contingent Conversion Object at step  304  in FIG. 3, or a user who services or maintains a financial instrument using a Contingent Conversion Object at step  404  in FIG. 4, may select from a list of Contingent Conversion features, at step  1501 . Contingent Conversion features may include: CoCo Trigger Type, CoCa Interpolate Trigger, CoCo Change Frequency, CoCo Triggered This Quarter, CoCo Triggered Next Quarter. Contingent conversion triggers may be specified using provisional call trigger types, and trigger levels may be constant or interpolated.  
         [0062]    [0062]FIG. 16 presents a cross section of a magnetic data storage medium  1600  which can be encoded with a machine executable program that can be carried out by a system such as system  100  of FIG. 1. Medium  1600  can be floppy diskette or hard disk, having a suitable substrate  1601 , which may be conventional, and a suitable coating  1602 , which may be conventional, on one or both sides, containing magnetic domains (not visible) whose polarity or orientation can be altered magnetically. Medium  1600  may also have an opening (not shown) for receiving the spindle of a disk drive or other data storage device.  
         [0063]    The magnetic domains of coating  1602  of medium  1600  are polarized or oriented so as to encode, in manner which may be conventional, a machine-executable program such as that described above in connection with FIGS.  2 - 4 , for execution by a system such as system  100  of FIG. 1.  
         [0064]    [0064]FIG. 17 shows a cross section of an optically-readable data storage medium  1700  which also can be encoded with such a machine-executable program, which can be carried out by a system such as system  100  of FIG. 1. Medium  1700  can be a conventional compact disk read only memory (CD-ROM or DVD-ROM) or a re-writable medium such as a CD-R, CD-RW, DVD-R or DVD-RAM disk or a magneto-optical disk which is optically readable and magneto-optically writeable. Medium  1700  preferably has a suitable substrate  1701 , which may be conventional, and a suitable coating  1702 , which may be conventional, usually on one side of substrate  1701 .  
         [0065]    In the case of a CD-ROM, CD-R, CD-RW, DVD-ROM, DVD-R, and DVD-RAM as is well known, coating  1702  is reflective and is impressed with a plurality of pits  1703  to encode the machine-executable program. The arrangement of pits is read by reflecting laser light off the surface of coating  1702 . A protective coating  1704 , which preferably is substantially transparent, is provided on top of coating  1702 .  
         [0066]    In the case of magneto-optical disk, as is well known, coating  1702  has no pits  1703 , but has a plurality of magnetic domains whose polarity or orientation can be changed magnetically when heated above a certain temperature, as by a laser (not shown). The orientation of the domains can be read by measuring the polarization of laser light reflected from coating  1702 . The arrangement of the domains encodes the program as described above.  
         [0067]    Thus, a system and method for creating, testing, evaluating, issuing, offering, selling, servicing and maintaining convertible or exchangeable financial instruments, which provides the user with the flexibility to modify inputs objects, features of said objects and input values, allows the a user to bring new financial instruments to the market in both an cost effective and time efficient manner.

Technology Classification (CPC): 6