New invention for the derivatives market - How to profit of it?

thecoder

thecoder

I've created a new & IMO revolutionary new financial instrument for the derivatives market.
It has the potential to replace another of such a currently used instrument.
But realistically seen this would take many years until the exchanges get convinced and
switch to the new instrument. So, initially the exchanges would offer this instrument as
an additional one, besides the existing ones.

The invention is basically an improvement over the Black-Scholes-Merton (BSM) option model.
It does not replace it fully, but still significantly, ie. 1/3 to 1/2 of it :)

But now I'm in a dilemma: how do I protect this surely once-in-a-life invention as a product, as well the algorithm it uses?
Ie. how can I make money of this invention by licensing it as a product (its trademark and the algorithm)?

One possibility would be to set up an own brokerage firm and offer that new instrument
alongside the existing instruments. I'm sure the traders would love this new trading instrument.
But, of course I don't have the big finances required for such a big endeavor.

Any suggestions on how best to proceed in such a situation?

Btw, I'm a non-US in Europe, but as we all know for derivatives the music plays mainly in the US :)
I'm not a professional researcher, so writing a paper and getting some fame is of course good,
but I instead prefer making some money of this idea as I'm in need of it :)

(Definition of a financial instrument: https://en.wikipedia.org/wiki/Financial_instrument )
 
thecoder said:
Unfortunately I can't pay these guys. Any other alternatives?
More...

How bout you make a few grand from actually trading!!


thecoder said:
a new & IMO revolutionary new financial instrument for the derivatives market.
It has the potential to replace another of such a currently used instrument.
More...

A new "instrument" with "potential to replace" a currently used "instrument".

thecoder said:
The invention is basically an improvement over the Black-Scholes-Merton (BSM) option model.
It does not replace it fully, but still significantly, ie. 1/3 to 1/2 of it :)
More...

Ummm...
 
An important question to ask is how is the sponsor or dealer of the new product able to make money from the products' trading activity? For example, sponsors of ETFs typically make money from fees.

If what you have is a model and not a tradable product it will be hard to get it adopted. If it truly is a better mouse trap, trade it yourself. Otherwise, try to get it published in peer reviewed journals and lecture in the academic circles, which will be hard if you are not an accepted academic.
 
Fyi: "financial instrument" in this context means of course an option contract type, like CALL and PUT; the new one is just another similar one.
Ie. it's not something like a new index product like an ETF or so.
It's a new option type, similar to CALL and PUT, but of course different.
 
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Why would people want to trade your instrument versus existing structured products? How would dealers make money from its' trading activity, from the spread?
 
It's at the moment about midnight here over in Europe. Tomorrow I'll register first a domain having my trademark for this product as the 2nd level domain name, and then register the trademark itself.

Then I'll establish my own brokerage firm :-) But only a virtual brokerage firm :-), not much different from a real one. Intended primarily for algorithmic trading, bot trading, HFT etc., where people can use their own algorithms and bots etc.
The eye-catcher of this brokerage firm will be the new option type, so that also the real derivatives exchanges and brokers from all over the world can see and study it. I think this will convince them to license this product for use.
 
panzerman said:
Why would people want to trade your instrument versus existing structured products? How would dealers make money from its' trading activity, from the spread?
More...
Because the new product (ie. the new option type) is a better one over the existing one.
But as said, both can still co-exist; the traders decide which they want to use.
I'm confident the majority will chose the new one as the maths behind it will 100% convince them... :)
 
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