Patent ID: 7970670

Claim:
A method for exchanging credit futures contracts comprising: receiving, by a computer, a first trade order from a first party requesting a long position on a probability of default futures contract (POD), the POD having a reference entity and a maturity date, the POD having first and second potential settlement prices at the maturity date that are predetermined prior to a beginning of a term of the POD; receiving, by the computer, a second trade order from a second party requesting a short position on the POD; matching, by the computer, the first trade order with the second trade order; recording on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, by the computer, a daily settlement price for the POD for each day of trading of the POD; determining, by the computer, a daily settlement payment between the first party and the second party based on the daily settlement price; selecting one of the first and second potential settlement prices to be a final settlement price of the POD, the selecting being performed based at least in part on solvency of the reference entity; determining, by the computer, a final settlement payment between the first party and the second party based on the final settlement price, the first party and the second party both being obligated to settle the POD at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is insolvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is solvent at the maturity date; and recording on a computer readable storage medium, settlement of the POD at the final settlement price.