Patent ID: 7596524

Claim:
A computer-assisted method for analyzing the interest rate exposure of a fixed-income instrument comprising: identifying N significant constituent exposures in a yield curve; and computing, using a computer, a unique set of hedge weights for M hedge instruments, wherein M>N, based on the formula: x=B −1 [M T ( MM T ) −1 p+z] where M=AB −1 and p=y−Mz, and where: A represents a matrix of significant constituent exposures of the hedge instruments, x represents a matrix of the computed hedge weights, wherein elements of the matrix x are numbers of units of notional for the hedge instruments, y represents a matrix of significant constituent exposures of the instrument to be hedged, B represent a matrix of key-rate exposures of the hedge instruments, and z represents a matrix of key-rate exposures of the instrument being hedged, where elements of matrices A, B, y, and z are in a currency of the hedge instruments.