Patent ID: 7774266

Claim:
A computer-implemented method for determining a present value of an option on a security having a fixed cash flow leg, the method comprising: computing, with a computer system that comprises a processor and memory, a numeraire for the option; computing, with the computer system, a strike coupon rate for the option based on a strike price of the option, a notional of the security, coupon dates of the security, and discount factors for the security; and computing, with the computer system, the present value of the option based on a product of factors, the factors comprising: the numeraire; the notional of the security; and an expected value of the greater of a plurality of values, wherein the plurality of values comprises: a first value that is a constant; and a second value that is computed based on at least a coupon rate of the security and the strike coupon rate for the option, wherein the strike coupon rate is a Martingale.