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US 8,285,620 B1Granted
Methods and systems for building and managing portfolios based on ordinal ranks of securities
AssigneeWestpeak Global Advisors, LLC
InventorRonan G. Heaney
Life of this patent
Estimating the term…
Abstract
A system, method, and computer-readable medium are provided for managing a portfolio using financial instrument rankings. A processor determines portfolio weights for financial instruments based on a ranking associated with each instrument, a cutoff rank, and a risk multiplier.
Claims14
A method of assigning portfolio weights to each financial instrument in a portfolio of financial instruments based on a ranking of the financial instruments, the method comprising:
- assigning a long-short portfolio weight to each financial instrument in the portfolio to create a long-short portfolio by:
- determining, with a processor, a cutoff rank and a long-short risk multiplier (LSRM) parameter for the portfolio, wherein the LSRM parameter is indicative of a magnitude of active positions in the long-short portfolio;
- determining, with the processor, a ranking and a benchmark weight for each financial instrument in the portfolio;
- and
- assigning, with the processor, a long-short portfolio weight to each financial instrument in the portfolio, wherein the long-short portfolio weight assigned to the ith financial instrument is determined according to the relationship
- PorWgti=BmKWgti+(LSRM*RelWgti),
- wherein BmkWgti denotes the benchmark weight for the ith financial instrument and RelWgti denotes a relative weight for the ith financial instrument determined according to the relationship
- RelWgti=(Ranki−Rankc)/ΣRanki>=Rankc(Ranki=Rankc)
- for all i with Ranki>=Rankc
- and
- RelWgti=(Ranki−Rankc)/ΣRanki<Rankc|(Ranki−Rankc),
- for all i with Ranki<Rankc,
- wherein Ranki denotes the ranking for the ith financial instrument and Rankc denotes the cutoff rank;
- and
- converting the long-short portfolio weight for a respective financial instrument in the long-short portfolio to a corresponding long-only portfolio weight by:
- determining, with the processor, a long-only adjustment multiplier (LOAM) parameter based on the LSRM parameter and a sum of long-short portfolio weights corresponding to short-held financial instruments in the long-short portfolio;
- assigning, with the processor, a long-only portfolio weight to the respective financial instrument based on a difference between the ranking of the respective financial instrument and the cutoff rank, the benchmark weight of the respective financial instrument, and the LOAM parameter, if the ranking of the respective financial instrument is larger than the cutoff rank;
- and
- assigning, with the processor, a long-only portfolio weight of substantially zero to the respective financial instrument if the respective financial instrument corresponds to a short-held financial instrument in the long-short portfolio.
16 more elements
A system for assigning portfolio weights to each financial instrument in a portfolio of financial instruments based on a ranking of the financial instruments, the system comprising:
- a database;
- and
- a processor configured to:
- determine a cutoff rank and a long-short risk multiplier (LSRM) parameter for the portfolio, wherein the LSRM parameter is indicative of a magnitude of active positions in a long-short portfolio;
- determine a ranking and a benchmark weight for each financial instrument in the portfolio, wherein the benchmark weight is retrieved from the database;
- assign a long-short portfolio weight to each financial instrument in the portfolio, wherein the long-short portfolio weight assigned to the ith financial instrument is determined according to the relationship
- PorWgti=BmKWgti+(LSRM*RelWgti),
- BmkWgti, denotes the benchmark weight for the ith financial instrument and RelWgti denotes a relative weight for the ith financial instrument determined according to the relationship
- RelWgti=(RanKi−Rankc)/ΣRanki>=Rankc(Ranki−Rankc),
- for all i with Ranki>=Rankc
- and
- RelWgti=(Ranki−Rankc)/ΣRanki<Rankc|(Ranki−Rankc|,
- for all i with Ranki<Rankc,
- wherein Ranki denotes the ranking for the ith financial instrument and Rankc denotes the cutoff rank;
- determine a long-only adjustment multiplier (LOAM) parameter based on the LSRM parameter and a sum of long-short portfolio weights corresponding to short-held financial instruments in the long-short portfolio;
- assign a long-only portfolio weight to the respective financial instrument based on a difference between the ranking of the respective financial instrument and the cutoff rank, the benchmark weight of the respective financial instrument, and the LOAM parameter, if the ranking of the respective financial instrument is larger than the cutoff rank;
- and
- assign a long-only portfolio weight of substantially zero to the respective financial instrument if the respective financial instrument corresponds to a short-held financial instrument in the long-short portfolio.
15 more elements
Dependencies are inferred from the claim text.