Risk management system and method providing rule-based evolution of a portfolio of instruments

A computer-readable medium having computer readable instructions stored thereon when executed by a computer to perform a method, wherein a plurality of data structures defining a simulated dynamic portfolio for use with a risk management system in a simulation are embodied on said computer-readable medium, said simulated dynamic comprising a plurality of simulated instruments, the composition of said simulated dynamic portfolio being changeable under a plurality of possible future scenarios at a plurality of future time steps by a trade manager, each of the possible future scenarios having associated therewith a probability of the scenario occurring, said simulated dynamic portfolio comprising:

• (a) a holdings data structure indicating simulated instruments and their quantity in said simulated dynamic portfolio;
• and
• (b) a strategy definitions data structure indicating a trade manager in which at least one rule for a trading strategy is defined, wherein said at least one rule is dependent on at least one tracking attribute, on at least one tracking position, and on at least one trade position, wherein said at least one rule is defined prior to executing said simulation;
• wherein for each of said plurality of possible future scenarios at each of said plurality of future time steps, said at least one trade manager simulates changes to said simulated dynamic portfolio by valuing said simulated dynamic portfolio and evaluating said at least one rule to produce a changed simulated dynamic portfolio, wherein said changes are dependent on the value of said at least one tracking attribute at the current time step and on the respective possible future scenario, wherein said simulated dynamic portfolio becomes said changed simulated dynamic portfolio after said changed simulated dynamic portfolio is produced, wherein said changes to said simulated dynamic portfolio are reflected in said holding structure;
• wherein said valuing comprises retrieving at least one risk value for each of one or more subsets of said simulated instruments in said simulated dynamic portfolio from a database, wherein said database comprises a plurality of values for risk factors associated with said respective possible future scenario and said current time step, wherein said database further comprises a plurality of risk values computed by evaluating one or more instrument models employing one or more of said risk factors, each of said plurality of risk values being associated with an individual simulated instrument or pre-selected group of simulated instruments;
• and wherein for at least one of said plurality of possible future scenarios at one or more future time steps, said trade manager invokes a risk engine in generating one or more simulated instruments not existing at the time said at least one simulation is executed by evaluating an instrument model that employs one or more of said risk factors, and adds said generated simulated instruments to the simulated dynamic portfolio in producing a changed simulated dynamic portfolio.

A risk management system operable on a plurality of instruments, said system comprising:

• a computer processor configured to process;
• (a) at least one risk engine adapted to determine a risk value for each simulated instrument of a plurality of simulated instruments, said risk value determined by evaluating an instrument model that employs one or more risk factors for said simulated instrument under one of a plurality of possible future scenarios;
• (b) a database to store risk values of said plurality of simulated instruments and a plurality of values for risk factors, wherein each risk factor is associated with a possible future scenario and time step;
• (c) a simulated dynamic portfolio of simulated instruments, the composition of said simulated dynamic portfolio being changeable under said plurality of possible future scenarios at a plurality of future time steps, each of the possible future scenarios having associated therewith a probability of the scenario occurring, said simulated dynamic portfolio comprising a holding structure indicating simulated instruments and their quantity in said simulated dynamic portfolio and a strategy structure indicating a trade manager in which at least one rule for a trading strategy is defined, wherein said at least one rule is dependent on at least one tracking attribute, on at least one tracking position, and on at least one trade position, wherein said at least one rule is defined prior to executing said simulation;
• wherein for each of said plurality of possible future scenarios at each of said plurality of future time steps, said at least one trade manager simulates changes to said simulated dynamic portfolio by valuing said simulated dynamic portfolio and evaluating said at least one rule to produce a changed simulated dynamic portfolio, wherein said changes are dependent on the value of said at least one tracking attribute at the current time step and on the respective possible future scenario, wherein said simulated dynamic portfolio becomes said changed simulated dynamic portfolio after said changed simulated dynamic portfolio is produced, wherein said changes to said simulated dynamic portfolio are reflected in said holding structure;
• wherein said valuing comprises retrieving at least one risk value for each of one or more subsets of said simulated instruments in said simulated dynamic portfolio from a database, wherein said database comprises a plurality of values for risk factors associated with said respective possible future scenario and said current time step, wherein said database further comprises a plurality of risk values computed by evaluating one or more instrument models employing one or more of said risk factors, each of said plurality of risk values being associated with an individual simulated instrument or pre-selected group of simulated instruments;
• and wherein for at least one of said plurality of possible future scenarios at one or more future time steps, said trade manager invokes a risk engine in generating one or more simulated instruments not existing at the time said at least one simulation is executed by evaluating an instrument model that employs one or more of said risk factors, and adds said generated simulated instruments to the simulated dynamic portfolio in producing a changed simulated dynamic portfolio;
• and
• (d) an aggregating engine adapted to retrieve said risk values from said database to produce an output risk metric dependent on at least one risk value stored in said database and the composition of said simulated dynamic portfolio under at least one of said plurality of possible future scenarios.