Patent ID: 7890409
Filing Date: 2011-02-15
Classification: G06Q

Abstract:
1. A computer-implemented system for providing reallocation and reverse optimization of a financial portfolio using a parametric leptokurtic distribution, comprising: a memory containing a database configured to store a time series comprising a plurality of risk factors applicable over at least one time horizon, a portfolio comprising a plurality of financial assets, a quantile, and one or more risk adjusted return points for the financial assets; an input device to receive input from a user; a network operatively coupled and providing communication between the memory, the input device, an output device, and a processor; where the processor is programmed to execute program modules, the program modules comprising: where the relation holds: where ζ is a real number, VaR(x, ε) is Value-at-Risk of a portfolio where x=(x 1 , x 2 , . . . , x n ) is a portfolio structure as a vector of portfolio allocation weights, ε is the quantile, f q (z) is the parametric distribution exhibiting leptokurtic behavior, with the density function of random vector q of future log prices of all portfolio prices one period ahead, vector z, where z=(z — 1, . . . , z_n), is in n-dimensional Euclidean space and is over the domain of those z such that the value −z T x+V 0 is larger than VaR(x, ε), where z T is the transposed vector of z, and V 0 is present portfolio log-value; and a portfolio reallocation module configured to determine a set of portfolio asset weight changes for each of the financial assets based on the expected tail loss at each such time horizon and for each risk adjusted return point, wherein the output device is configured to provide reallocation of the portfolio based on the portfolio asset weight changes for each risk adjusted return point for the portfolio.