Patent ID: 7783551

Claim:
A financial instrument price simulation processor-implemented method comprising: providing via a processor a parametric model for an at least one financial instrument price having at least one noise-varying parameter α n with a corresponding noise component ε n ; determining values for the at least one parameter and the financial instrument price at various time indices i using historical data; deriving a set of historical residual values ε n,i for each noise component ε n , the historical residual value ε n,i at index i, when applied to the model with the determined parameter values at index i, at least substantially reproducing the determined financial instrument price at index i; standardizing each set of historical residual values ε n ; and using values selected from the set of standardized historical residual values ε n as the noise component during a simulation of the financial instrument price via the model, comprising generating a set of simulated parameter values using values selected from the corresponding set of standardized historical residual values ε n for each noise-varying parameter α n in the model; storing the simulated values for each parameter; and applying stored simulated parameter values to the model to produce simulated financial instrument prices.