Patent ID: 8606682

Claim:
A system, comprising: a memory operable to store a correlation index that is based at least in part on: a portfolio of index options associated with an index; a plurality of stock options associated with a plurality of stocks; and a plurality of deltas computed using a plurality of constant flat implied volatilities, the plurality of deltas comprising: a plurality of index deltas that indicate changes in prices of the index options with respect to the index; and a plurality of stock deltas that indicate changes in prices of the stock options with respect to the plurality of stocks; and a processor communicatively coupled to the memory and operable to determine a value of the correlation index by: selecting, using a predetermined standard deviation range, a plurality of strike prices for each of the index and stock options; computing on a first date, using the selected strike prices, a flat implied volatility for the index and the plurality of stocks; holding the computed flat implied volatilities constant over a predetermined time period, thereby creating the plurality of constant flat implied volatilities; computing the plurality of deltas using the plurality of constant flat implied volatilities; computing a daily profit and loss (P&L) based on a change in a value of the portfolio of index and stock options, the plurality of deltas, an interest on cost to borrow stock, and an interest on funding; and determining a current correlation index value based at least in part on a previous correlation index value and the computed daily P&L.