Patent ID: 7966242

Claim:
A computer-implemented method for hedging contract risks, the method comprising: receiving, by at least one processor, information related to a supply contract between a seller and a buyer, the buyer being committed to purchase inventory from the seller over a period of time; estimating, by at least one processor, potential liquidation damages that the seller will suffer if at least one credit event causes the buyer to default on the supply contract; calculating, by at least one processor, a put option, whereby, upon the at least one credit event, the seller can choose to sell a claim of liquidation damages against the defaulting buyer at a strike price, the calculating further comprising determining the strike price that varies based at least in part on the estimated potential liquidation damages and the time at which the at least one credit event occurs; and storing, in a storage medium, data related to one or more of said supply contract, said estimated potential liquidation damages, and said calculated put option.