Patent ID: 8412609

Claim:
A method for identifying a regime-based asset allocation via an adaptive risk premium, the method comprising: receiving a plurality of financial data associated with a plurality of financial markets; receiving a plurality of financial parameters; generating, based on the plurality of financial data and using a central processing unit (CPU), an adaptive risk premium using an adaptive risk premium model; determining, using the CPU and based on the adaptive risk premium, a high risk regime comprising high risk regime expected returns and a high risk regime covariance matrix of assets; determining, using the CPU and based on the adaptive risk premium, a normal risk regime comprising normal risk regime expected returns and a normal risk regime covariance matrix of assets; determining, by the CPU and based on the adaptive risk premium, a low risk regime comprising low risk regime expected returns and a low risk regime covariance matrix of assets; calculating a plurality of calculated weights for the high risk regime, the normal risk regime, and the low risk regime using the plurality of financial parameters and the plurality of financial data; obtaining a current portfolio; identifying, based on the plurality of financial data and using the CPU, a current risk regime corresponding to the current portfolio, wherein the current risk regime is one selected from a group consisting of the high risk regime, the normal risk regime, and the low risk regime; determining, using the CPU, a plurality of asset weights of the current portfolio comprising a plurality of asset classes; adjusting, using the CPU, the plurality of asset weights of the current portfolio to match the plurality of calculated weights for the current risk regime to create a first adjusted plurality of asset weights; calculating a momentum, volatility, and a correlation (MVC) for each asset class of the plurality of asset classes of the current portfolio; ranking, using the CPU, each asset class of the current portfolio by the MVC; adjusting, based on the MVC and using the CPU, the first plurality of adjusted asset weights of the current portfolio to create a second plurality of adjusted asset weights; determining, using the CPU, one of the second plurality of adjusted asset weights for the current portfolio; and generating an investment portfolio based on the one of the second plurality of adjusted asset weights for the current portfolio.