Patent ID: 7756770
Filing Date: 2010-07-13
Classification: G06Q

Abstract:
1. A system for determining an optimal portfolio from a plurality of portfolios using a non-variance-based method performed by computer, wherein the system comprises a processor and a memory, wherein the processor is configured to execute instructions to provide: a first risk engine configured to compute a mark-to-future value for each of the plurality of portfolios, wherein the mark-to-future value for a portfolio is calculated from mark-to-future values for the instruments in the portfolio, and wherein the mark-to-future value for an instrument is a simulated expected value for the instrument under a future scenario at a time point; and a second risk engine configured to: for each of the plurality of portfolios, disaggregate the portfolio such that the portfolio is characterized by an upside value and a downside value, wherein the upside value is the expected value, over a plurality of future scenarios, each with an associated probability of future occurrence, of the unrealized gains of the portfolio calculated as the absolute differences between the mark-to-future value of the portfolio and a benchmark value where the mark-to-future value of the portfolio exceeds the benchmark value, and wherein the downside value is the expected value, over the plurality of future scenarios, each with an associated probability of future occurrence, of the unrealized losses of the portfolio calculated as the absolute differences between the mark-to-future value of the portfolio and the benchmark value where the benchmark value exceeds the mark-to-future value of the portfolio; determine at least one efficient portfolio from the plurality of portfolios, wherein each efficient portfolio is a portfolio in which the upside value therefor is maximized with the downside value therefor not exceeding a limit of one or more specified limits; obtain a utility function provided as input, and selecting an optimal portfolio from the at least one efficient portfolio that maximizes the utility function; wherein the second risk engine is configured to determine at least one efficient portfolio by solving a linear program defined by: where q is the current mark-to-market values of securities; M is the Mark-to-Future values (M p is the subjective prior scenario probabilities; r is the benchmark growth rates; X is the position sizes; X X d is the portfolio unrealized loss or downside; u is the portfolio unrealized gain or upside.