Patent ID: 7752126

Claim:
A computer-implemented method for computing and outputting an indicated price, with adjustment for risk, and adjustment for parameter uncertainty, of anticipated contract obligations comprising the steps of: a) obtaining input identifying an underlying risk vehicle comprised of a group of one or more assets and liabilities by computer, b) assembling a series of potential future cashflow outcomes, consisting of cashflow values linked to their respectively paired probabilities, as a future probability distribution for the underlying risk vehicle by computer, c) sorting the series of outcomes by their ascending cashflow values from the lowest listed as first to the highest listed as last by computer, d) cumulating the respectively paired probabilities of the sorted series of outcomes so that the last such cumulated probability still linked to the highest cashflow value equals 1 by computer, e) providing individual inversely-mapped results for those probabilities, by applying the inversion of the standard normal distribution to all of the cumulated probabilities by computer, f) obtaining input selecting a lambda value as the market price of risk for the overall future probability distribution of the underlying risk vehicle by computer, g) adding the selected lambda value to obtain a shifted inversely-mapped result by computer, h) creating transformed cumulative probability weights by applying a Student-t cumulative distribution to each shifted result by computer, i) decumulating the transformed cumulative probability weights of the sorted series of outcomes so that the first decumulated weight equals its own cumulated weight, the second decumulated weight equals the second cumulated weight minus the first cumulated weight, the third decumulated weight equals the third cumulated weight minus the second cumulative weight, and so on, continuing until the last decumulated weight equals the last cumulated weight minus the next-to-last cumulated weight by computer, j) producing a set of weighted values by multiplying the cashflow values to their respective decumulated probability weights by computer, and k) computing and indicating an undiscounted future indicated price for the underlying risk vehicle by adding all the weighted values in the set by computer.