Patent ID: 8401956

Claim:
A non-transitory computer readable medium tangibly embodying a software program or a plurality of software programs, comprising: receiving an order through a computing device to trade a financial instrument in which counterparties agree to exchange a cash flow stream difference associated with, but not perfectly correlated to, at least one asset or liability affected by longevity risk characterized by underlying difficult to ascertain mortality distributions; calculating by said computing device, for each said individual, whose lifespan affects the cash flows of said asset or liability, a morbidity description expressed as at least one mortality scaling factor for at least one age of each said individual, a survivorship distribution that varies with time and a mortality distribution that varies with time, a net cash flow projection distribution that varies with time, where each distribution value in said net cash flow projection distribution is computed as the probability-adjusted cash in-flow expected over a period, less the probability-adjusted cash out-flow expected over the same period; calculating by said computing device, for each said individual, using said net cash flow projection distribution, a net present and net forward value distribution that varies with time; accepting through a computer device, the starting and ending dates over which said counterparties wish to exchange said cash flow stream difference to be exchanged for each of said counterparties to provide at least one exposure period; accepting through a computing device, an input for computing a performance bond amount to be levied on said counterparties, where said performance bond amount is insufficient to collateralize cash flow differences anticipated over said exposure period, and where said input uses data from either said net cash flow projection distribution or from said net present and net forward value distribution depending on the risk transfer preferences of the counterparties; receiving through a computing device, over time, updated mortality information and morbidity information underlying said longevity risk; and recalculating by a computer-readable medium storing instructions executable by a processor, distributions affected by said updated mortality and morbidity information to provide recalculated distributions; calculating, using said recalculated distributions, the difference to be exchanged for each of the counterparties wherein said difference to be exchanged cannot be greater than said performance bond for each of said counterparties.