Patent ID: 7676412

Claim:
A system for determining a minimum asset value for exercising a contingent claim of an option including one or more contingent claims exercisable at one or more of a plurality of decision points that includes an expiration exercise point and one or more decision points before the expiration exercise point, the system comprising: a processor configured to determine a present value conditional distribution of contingent future benefits attributable to the exercise of a contingent claim of the option at the expiration exercise point, the present value conditional distribution comprising a distribution of contingent future benefits conditioned on an estimated minimum asset value for exercising a contingent claim of the option at a selected decision point before the expiration exercise point, and discounted according to a first discount rate, wherein the processor is configured to determine present values of respective exercise prices required to exercise one or more contingent claims of the option at the expiration exercise point and at least one of the one or more decision points before the expiration exercise point, the present values of respective exercise prices comprising respective exercise prices discounted according to a second discount rate, wherein the processor is configured to determine a conditional value based upon the present value conditional distribution of contingent future benefits and the present values of respective exercise prices, and wherein the processor is configured to repeatedly determine a present value conditional distribution and a conditional value for different estimated minimum asset values until the conditional value equals approximately zero, the respective minimum asset value being selected as the minimum asset value for the selected decision point.