US 7,925,565 B2Granted

Stochastic control system and method for multi-period consumption

AssigneeAdvisor Software, Inc.

InventorsNicolo G. Torre, Andrew T. Rudd

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Abstract

The present invention relates to dynamic optimization of system control over time. The need for dynamic optimization arises in many settings, as diverse as solar car power consumption during a multi-day race and retirement portfolio management. We disclose a reformulation of the control problem that overcomes the so-called “curse of dimensionality” and allows formulation of optimal control policies multiple period planning horizons. One optimal control policy is for power consumption by a solar car during a race, which involves many course segments, as course conditions vary through a day. Another is for risk in and consumption from a portfolio intended to support retirement. Both multi-period control policies take into account future uncertainty. Particular aspects of the present invention are described in the claims, specification and drawings.

Claims14

Dependent claims

A computer-implemented method for generating a recommended a control action policy in a multi-year planning setting, the method including:

retrieving mean return, variance and covariance data for multiple of classes of prospective investments;
electronically calculating, from the retrieved data, returns on alternative diversified portfolios that include the prospective investments;
setting up a computer-solvable problem, including assigning a search grid spanning and subdividing at least
a time horizon,
potential resource values for an investor's portfolio,
a range of spending levels that satisfy essential goals of the investor and are then applied to satisfying the investor's non-essential goals, and
the range of risk taking levels;
and
working backwards through the time horizon,
using a computer to evaluate potential control actions for particular times and resource values within the search grid,
selecting recommended control actions for the particular times and resource values, the control actions setting spending and risk taking levels for the particular times, and
combining the control actions into a control action policy that includes the recommended spending and risk taking levels for combinations of the particular times and resource values;
wherein using the computer to evaluate the potential control actions for the particular times and resource values includes calculating a utility of potential spending and risk taking levels,
such that the utility at a specific time and resource value for the potential spending and risk taking levels combines at least
a utility in the specific time of the spending and
a future expected utility through an end of the time horizon of future spending and risk taking levels;
and
such that the utility calculation recognizes a greater utility of satisfying the essential goals than of satisfying the non-essential goals;
and
outputting at least part of the control action policy for the time horizon and the potential resource values, including recommendations for the spending and the risk taking levels.

17 more elements

A planning server for selecting at least immediate control actions in a multi-year planning setting, the planning server including:

a first processor programmed to
access mean return, variance and covariance data for multiple of classes of prospective investments, and
determine returns on alternative diversified portfolios that include the prospective investments;
store the returns on the alternative diversified portfolios;
a second processor programmed to generate a search grid spanning and subdividing at least
a time horizon,
potential resource values for an investor's portfolio,
a range of spending levels that satisfy essential goals of the investor and are then applied to satisfying the investor's non-essential goals, and
the range of risk taking levels;
and
a third processor programmed to access the search grid and the stored returns on the alternative diversified portfolios and works backwards through the time horizon,
to evaluate potential control actions for particular times and resource values within the search grid,
to select recommended control actions for the particular times and resource values, the control actions setting consumption and risk taking levels for the particular times,
to combine the control actions into a control action policy that includes the recommended spending and risk taking levels for combinations of the particular times and resource values, and
to output the control action policy that includes the consumption and the risk taking levels;
wherein the third processor calculates a utility of potential spending and risk taking levels, such that the utility at a specific time and resource value for the potential spending and risk taking levels combines at least
a utility in the specific time of the spending that recognizes a greater utility of satisfying the essential goals than of satisfying the non-essential goals, and
a future expected utility through an end of the time horizon of future spending and risk taking levels.

15 more elements

Dependencies are inferred from the claim text.

Facts

Application: 12/419,209Filed 6 Apr 2009 · continuation
Priority: 12 Oct 2007
Published: US 2009/0099975 A18 Oct 2009
Granted: 12 Apr 2011
Term ends: Not estimatedThe source records don’t support an estimate.

Classification6 codes

G06Q 40/06
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: asset management; Financial planning or analysis
G06Q 10/10
Administration; Management: office automation; Time management
G06Q 40/00
Finance
G06Q 40/04
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: trading; Exchange, e.g. stocks, commodities, derivatives or currency…

Family

Application60/979,765Us provisional application · filed 12 Oct 2007
Application12/038,712Parent of this continuation · filed 27 Feb 2008
US 2009/0254491 A1Pre-grant publication · published 8 Oct 2009
US 7,516,095 B1Parent of this continuation
US 2009/0099975 A1Published application
US 7,925,565 B2This patent

From the US filing history. Foreign family members aren’t listed.