Inventors:
Tim Bridges - Summit NJ, US
Mark Evans - New York NY, US
Oliver Frankel - New York NY, US
International Classification:
G06F017/60, G06F007/00, G06F017/00
US Classification:
705036000, 705030000, 705037000, 707100000
Abstract:
An earnings volatility reduction procedure includes determining a first sensitivity value of a portfolio to underlying market conditions, trading in an immunizing instrument having a second sensitivity value substantially equal in magnitude and opposite in value of the first sensitivity value, and trading in a qualifying instrument having a third sensitivity value substantially equal to the first sensitivity value. A derivative portfolio (in particular, one that includes a financial instrument for which changes in value are characterized as earnings pursuant to FAS 133) is structured by determining a sensitivity of the derivative portfolio with respect to financial conditions in a trading market, executing an immunizing purchase of a second trading instrument in an amount equal to the magnitude of the current sensitivity and opposite in value, and executing a qualifying sale of a third trading instrument in an amount equal to amount of the current sensitivity.