System and Method for Generating Cross-Sectional Volatility Index
AssigneeParametric Portfolio Associates, LLC
InventorsPaul W. Bouchey, Hemambara Dasu Vadlamudi
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Abstract
A computer implemented system and method for generating a cross-sectional volatility index includes identifying a population of assets having predetermined characteristics to form an index, and capturing market capitalization data for each of the assets in the index. Each asset in the index is weighted according to its market capitalization, and returns are captured for each asset over a predetermined period. The weightings and the returns for each asset are used to calculate the weighted return dispersion for the index over the predetermined period, to form an XSV Index, in which the XSV Index is a measure of discrepancy in volatility among the assets in the index during the period.
Claims41
A computer implemented method of generating a cross-sectional volatility index, the method comprising:
- (a) identifying a population of assets having predetermined characteristics to form an index;
- (b) capturing market capitalization data for each of the assets in the index;
- (c) weighting each asset in the index according to its market capitalization;
- (d) capturing returns for each asset over a predetermined period;
- (e) calculating, using the weightings and the returns for each asset, the weighted return dispersion for the index over the predetermined period, to form an XSV Index, using the formula:
- XVOL
- =
- ∑
- i
-
- w
- i
-
- (
- r
- i
- -
- R
- )
- 2
- Where,
- wi=the capitalization weight of stock i,
- ri=the total return of stock i for the period for which XSV is calculated,
- R
- =
- ∑
- i
-
- w
- i
-
- r
- i
- wherein the XSV Index is a measure of discrepancy in volatility among the assets in the index during the period.
A computer-implemented system for generating a cross-sectional volatility index, the method comprising:
- a computer using a population identification (ID) module to identify a population of assets having predetermined characteristics to form an index;
- a computer using a capitalization module to capture market capitalization data for each of the assets in the index;
- the capitalization module configured to weight each asset in the index according to its market capitalization;
- a computer using a return module to capture returns for each asset over a predetermined period;
- a computer using a cross-sectional volatility (XSV) module to calculate the weighted return dispersion for the index over the predetermined period, using the weightings and the returns for each asset, to generate an XSV Index, using the formula:
- XVOL
- =
- ∑
- i
-
- w
- i
-
- (
- r
- i
- -
- R
- )
- 2
- Where,
- wi=the capitalization weight of stock i,
- ri=the total return of stock i for the period for which XSV is calculated,
- R
- =
- ∑
- i
-
- w
- i
-
- r
- i
- wherein the XSV Index is a measure of discrepancy in volatility among the assets in the index during the period.
An article of manufacture for generating a cross-sectional volatility index, said article of manufacture comprising a computer usable medium having an executable computer readable program code embodied therein, said computer readable program code configured for:
- identifying a population of assets having predetermined characteristics to form an index;
- capturing market capitalization data for each of the assets in the index;
- weighting each asset in the index according to its market capitalization;
- capturing returns for each asset over a predetermined period;
- and
- calculating, using the weightings and the returns for each asset, the weighted return dispersion for the index over the predetermined period, to form an XSV Index, using the formula:
- XVOL
- =
- ∑
- i
-
- w
- i
-
- (
- r
- i
- -
- R
- )
- 2
- Where,
- wi=the capitalization weight of stock i,
- ri=the total return of stock i for the period for which XSV is calculated,
- R
- =
- ∑
- i
-
- w
- i
-
- r
- i
- wherein the XSV Index is a measure of discrepancy in volatility among the assets in the index during the period.
Dependencies are inferred from the claim text.