Patent ID: 7627513

Claim:
A method to determine a value of an option, the option dependent upon a stochastic variable, the method comprising: receiving on a processor a specification of permissible error for the determination; receiving on the processor a function indicating the weight to be assigned in measuring error of the determination (error weight function), receiving a specification of an evolution of the stochastic variable; receiving on the processor a specification of a relationship between the option and the stochastic variable; apportioning on the processor the specification of permissible error among a plurality of time periods; evolving on the processor the error weight function through the plurality of time periods, wherein evolving the weight function from one time period to the next is determining the weight function at the next time period based upon the weight function at the previous time period and upon the evolution of the stochastic variable; determining on the processor values of the stochastic variable at the plurality of time periods, wherein: the determination of a value for one of the plurality of time periods is within the permissible error apportioned for the one of the plurality of time periods; and the determining values comprises weighting an estimate of an error of the determination of the value for the one of the plurality of time periods by the error weighting function; determining on the processor the value of the option, responsive to the determination of the values of the stochastic variable at the plurality of time periods; and storing on the processor the value of the option in a buffer.