Abstract: In accordance with the principles of the present invention a non-biased, computer-implemented financial instrument electronic trading system and electronic central clearinghouse are provided. The electronic trading system and electronic central clearinghouse operate to provide electronic trading of financial instruments that are non-biased in that the electronic trading system and electronic clearing house address at least one of two effects that result from the difference between variation margin on a cleared financial instrument and collateral posted on an uncleared financial instrument, the first effect being a systematic advantage of being short the financial instrument when there is a correlation between the value of the financial instrument and interest rates, referred to as a convexity bias, and the second effect being a distortion in the financial instrument when an underlying asset value of the financial instrument changes, referred to as a net present value (NPV) effect.

Abstract: In accordance with the principles of the present invention a non-biased, computer-implemented financial instrument electronic trading system and electronic central clearinghouse are provided. The electronic trading system and electronic central clearinghouse operate to provide electronic trading of financial instruments that are non-biased in that the electronic trading system and electronic clearing house address at least one of two effects that result from the difference between variation margin on a cleared financial instrument and collateral posted on an uncleared financial instrument, the first effect being a systematic advantage of being short the financial instrument when there is a correlation between the value of the financial instrument and interest rates, referred to as a convexity bias, and the second effect being a distortion in the financial instrument when an underlying asset value of the financial instrument changes, referred to as a net present value (NPV) effect.

Abstract: In accordance with the principles of the present invention, a computer-implemented, back-office method of creating, centrally clearing, and settling a non-biased financial instrument through an electronic trading platform and an electronic central clearinghouse to effectuate payments between parties to a trade is provided. The present invention addresses at least one of two effects that result from the difference between variation margin on a cleared financial instrument and collateral posted on an uncleared financial instrument, the first effect being a systematic advantage of being short the financial instrument when there is a correlation between the value of the financial instrument and interest rates, referred to as a convexity bias, and the second effect being a distortion in the financial instrument when an underlying asset value of the financial instrument changes, referred to as a net present value (NPV) effect.

Abstract: A system for electronically trading a rate-negotiated, standardized-coupon financial instrument said system including a memory receiving a coupon negotiated between two parties. At least one forward curve and a discount curve are implied or approximated by at least one processor in communication with the memory to be economically equivalent to the negotiated coupon. An economically equivalent value for a swap with a different coupon is determined by at least one processor. The economically equivalent value can comprise the net present value (NPV) of the interest rate swap written as the difference between the present values of two interest payment legs. In the case of a vanilla swap the two legs correspond to fixed coupon payments and floating coupon payments in the case of a basis swap, one leg is the floating coupon payments with a reference rate plus a fixed coupon, and the other leg is floating coupon payments with a different reference rate.

Abstract: In accordance with the principles of the present invention, a non-biased, centrally-cleared financial instrument, and method of electronic clearing and settling such a financial instrument is provided. The non-biased, centrally-cleared financial instrument of the present invention is to be centrally cleared and can be traded or transacted either on or off an exchange or trading platform, whether traded as a future or other type of financial instrument. The non-biased, centrally-cleared financial instrument of the present invention has a terminal value such that the terminal value offsets co-movement of variation margin and investment return on the variation margin during the life of the financial instrument.