Basis Instrument Contracts (BICs) derived methods, systems and computer program products for distributional linkage and efficient derivatives pricing

摘要

The present invention describes methods, systems and computer program products derived from the BICs structural framework and pricing methodology to facilitate at least two types of intermediate decision-making problems:(i) Methods, systems and computer program products that help generate the distributional relationship between two or more real number physical observable(s) a.k.a underlying(s) with flexibility and logical coherence. The underlying(s), outcomes/actual numeric realizations at one or more future time periods may be unknown at a time of consideration but the distributions of outcomes exist for each individual underlying and/or for each couple of underlyings. This invention uses a Basis Instrument Contract pricing and representation format to generate the multivariate distribution of all the underlyings knowing only the univariate or bivariate distributions. The availability of such a coherently generated(ii) Methods that help generate the price of various derivatives contracts using BICs in efficient analytical formulas or very fast numerical methods. This is particularly the case when the underlyings are driven by Levy processes or with readily available characteristic functions. The systems and computer program products that use these methods are thus faster and more flexible with respect to the variety of derivatives contract payouts that can be seamlessly priced as well as the possible assumptions on the distributions of the underlyings.