Patent ID: 7469223
Filing Date: 2008-12-23
Classification: G06Q

Abstract:
1. A computer-implemented method for forming an index, the index including a subset of instruments selected from a universe of N instruments, the method comprising the steps of: a) assigning a covariance matrix to the universe, said covariance matrix comprising a variance for each of the instruments and a correlation matrix; b) calculating an original dv01 of the universe; c) after calculating the original dv01 of the universe, removing one of the instruments from the universe; d) calculating a residual variance for each of the instruments remaining in the universe; e) calculating a residual variance for the universe based on the residual variance for each of the instruments and the correlation matrix; f) reinstating the instrument into the universe; g) repeating steps c-f for each instrument in the universe; h) inserting into the index the one of the instruments for which the residual variance of the universe is minimized and calculating a remaining dv01 of the universe; i) elimination from the universe the one of the instruments for which the residual variance of the universe is minimized; and j) repeating steps c-i until the index is formed, wherein said index is formed when the remaining dv01 of the universe is a predetermined percentage of the original dv01 of the universe, and wherein at least one of the steps is implemented with a computer.