Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Patent
1996-02-13
1998-10-06
Weinhardt, Robert A.
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
G06F 1760
Patent
active
058192379
ABSTRACT:
A system, method, and product determines the incremental impact of any number of candidate trades on the value at risk (VaR) measure of a trading portfolio within a trading interval, without requiring that the VaR measure be redetermined individually with respect to each candidate trade. The method includes determining the VaR measure for the trading portfolio, and determining a derivative vector quantity for the VaR measure. For each candidate trade, the impact of the candidate trade on the VaR measure is determined as the vector product of the derivative vector and the mapped cashflows of the candidate trade. A negative sign indicates a desirable reduction in the VaR measure. This determination may be made for any number of candidate trades without having to re-determine the VaR measure. The software product employs this method in a financial analysis application in an optimized implementation. The system includes the software product along with databases storing the trading portfolio(s). Additionally, the method and product allow each candidate trade to be normalized with respect to selected criteria, so that a number of individual candidate trades may be ranked with respect to their incremental impact on the VaR measure to determine the candidate trade the best reduces the VaR measure.
REFERENCES:
patent: 5446885 (1995-08-01), Moore et al.
Beckstrom, Rod and Campbell, Alyce, "An Introduction to VaR", 1995 C.cndot.ATS Software, Inc.
Kalra, Anu, "Measuring Value-at-Risk", Learning Curve, Derivatives Week, Sep. 26, 1994.
Morgan, J.P., "Latest Developments in RiskMetrics", Risk Magazine Annual Congress, Morgan Guaranty Trust Company, Jan. 25, 1996.
Morgan, J.P., "Introduction to RiskMetrics", Morgan Guaranty Trust Company, Market Risk Research, Oct. 6, 1994.
Morgan, J.P., "RiskMetrics.TM.--Technical Document", Third Edition, Morgan Guaranty Trust Company, Global Research, May 26, 1995.
Financial Engineering Associates, Inc.
Groutt Phillip
Weinhardt Robert A.
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