Patent ID: 7065475

Claim:
A computer-implemented method for pricing an option comprising: (a) calculating in a computer the formula: dF ⁡ ( t , ⁢ T ) F ⁡ ( t , T ) = ∑ a ⁢ [ ∑ i ⁢ y ia ⁢ B i ⁡ ( t , T ) ⁢ g i ⁡ ( T ) ] ⁢ σ a ⁡ ( t ) ⁢ dz a ⁡ ( t ) , wherein F(t, T) represents the value of the underlying asset and dF(t, T) represents a change in the value of the underlying asset; i represents an amount of mean reversion factors used in the model; t represents the current time; T represents the forward time; y ia represents the move shape coefficient; B i (t, T) represents the mean reversion factor; g i (T) represents the volatility adjustment factor; σ a (t) represents the instantaneous factor volatility; and dz a (t) represents the random increment; a represents the index enumerating the random increments dz a (t); and (b) calculating in a computer a price of an option based on the calculated results of the formula.