Patent ID: 8793175

Claim:
A non-transitory computer readable storage medium having computer-executable instructions recorded thereon that, when executed on a computer, configure the computer to perform a computer implemented method comprising: accessing and processing data regarding a single tranche derivative transaction, wherein the single tranche derivative transaction includes a reference portfolio, and wherein the single tranche derivative transaction includes a single transacted tranche n within a capital structure containing a plurality of reference tranches; determining a level of impairment of each of the plurality of reference tranches following an occurrence of a principal loss in the reference portfolio; allocating said principal loss in a reverse sequence among the plurality of reference tranches beginning with a most subordinate tranche; determining an amount of notional principal to restore each of the plurality of reference tranches following an occurrence of a principal shortfall reimbursement or a writedown reimbursement in the reference portfolio; allocating said principal shortfall reimbursement or writedown reimbursement in sequence among the plurality of reference tranches beginning with a most senior tranche that has been impaired and ending with the most subordinate tranche; determining an amount of a principal reduction for each of the plurality of reference tranches following a principal payment in the reference portfolio; allocating the principal payment in sequence among the plurality of reference tranches beginning with the most senior tranche and ending with the most subordinate tranche; determining an outstanding tranche notional amount of the single transacted tranche n and each of the plurality of reference tranches based on the allocation of principal losses, principal shortfall reimbursements, writedown reimbursements, and principal payments; and calculating the outstanding tranche notional amount of the single transacted tranche n using the formula: max[(OTN n *ITF n )−ΣIPL n +ΣIPR n −max(ΣPP−IPS+LC n ,0),0], wherein: OTN n is an original tranche notional for single transacted tranche n, ITF n is an initial tranche factor for single transacted tranche n, IPL n is incurred principal losses for single transacted tranche n, IPR n is incurred principal reimbursements for single transacted tranche n, PP is a principal payment, IPS is an initial portfolio size, and LC n is a loss cap for single transacted tranche n.