Hedging exchange traded mutual funds or other portfolio basket products
AssigneeNYSE Alternext US LLC
InventorsClifford Weber, Carol Alexander, Charles A. Baker
Life of this patent
Estimating the term…
Abstract
A system for pricing and/or determining a basket of financial instruments for hedging investment risk in actively managed traded funds is described. The system uses a trusted computer system and includes a computer storage medium storing a computer program product. The product determines a basket of hedging instruments by applying statistical or economic based factor analysis to estimate the NAV or provide a hedging basket to track actual NAV of an actively managed traded fund.
Claims35
A method of pricing and/or hedging investment risk in traded actively managed funds, comprises:
- using multi-factor risk models to construct a hedging portfolio for the actively managed traded fund.
A method of hedging investment risk in actively managed traded funds, comprises:
- grouping securities into groups of securities for which there is some basis to believe that their prices might move together;
- and for each group
- performing a principal component analysis (PCA) over some percentage of variation (y %) to arrive at a subset of the principal components as the factors for the particular group;
- estimating factor sensitivities of the subset of factors in each of the groups for a particular actively managed fund in order to estimate an intraday approximation of NAV of the actively managed fund on a particular day.
A computer program product residing on a computer readable medium for pricing and/or hedging investment risk in actively traded funds, which are traded intra-day, comprises instructions to cause a computer to:
- construct a hedging portfolio for the actively managed traded fund using principal component analysis to analyze security price movements of a large group of securities over a period of time to discern correlations between such price movements of the analyzed group and price movements of the actively managed fund.
A computer program product residing on a computer readable medium for pricing and/or hedging investment risk in actively traded funds, which are traded intra-day, comprises instructions to cause a computer to:
- group securities into groups of securities for which there is some basis to believe that their prices might move together;
- and for each group
- perform a principal component analysis (PCA) over some percentage of variation (y %) to arrive at a subset of the principal components as the factors for the particular group;
- estimate factor sensitivities of the subset of factors in each of the groups for a particular actively managed fund in order to estimate the NAV of the actively managed fund on a particular day.
An apparatus, comprises:
- a processor;
- a computer readable medium storing a computer program product for pricing and/or hedging investment risk in actively traded funds, which are traded intra-day, with the computer program product comprising instructions to cause the processor to:
- group securities into groups of securities for which there is some basis to believe that their prices might move together;
- and for each group
- perform a principal component analysis (PCA) over some percentage of variation (y %) to arrive at a subset of the principal components as the factors for the particular group;
- estimate factor sensitivities of the subset of factors in each of the groups for a particular actively managed fund in order to estimate the intraday approximation of NAV of the actively managed fund on a particular day.
An actively managed fund that is traded intra-day between buyers and sellers, comprises:
- shares or derivative instruments corresponding to an interest in the actively managed fund, with the shares or derivative instruments being traded based on a hedging basket of securities derived by applying a principal component analysis to a group of securities to select a subset of the group and weightings for the subset to account for a percentage of variation (y %) of actively managed fund.
Dependencies are inferred from the claim text.