Patent ID: 7430539

Claim:
A computer-implemented method of computing a margin requirement for a portfolio, the portfolio comprising at least one product having an associated fixed payoff value based on an occurrence of one of a finite set of at least two outcomes of an event, the method comprising: computing a product value of each of the at least one product; determining, for each of the at least one product, other outcomes of the finite set, other than the at least two outcomes, that may occur for the event which affect the associated fixed payoff with respect to at least one of the at least two outcomes and not redundant in view of other of the other outcomes; generating, for each of the at least one product, an array defining a risk value for each of the at least two outcomes and each of the other outcomes, the risk value comprising one of a gain or loss of the product value associated with the particular outcome; adjusting each of the risk values based on a discount related to the likelihood of occurrence of the associated outcome; determining, for each of the at least two outcomes and each of the other outcomes, an aggregate risk value of the risk values for each of the at least one product for the particular outcome; determining a maximum aggregate risk value comprising the aggregate risk value representing the largest loss from among the aggregate risk values for each of the at least two outcomes and each of the other outcomes; and computing a margin requirement equal to the difference between the product value and the maximum aggregate risk value.