Separate trading of registered interest and principal of securities system, method and computer program product

• US 20050197944A1
• Filed: 02/04/2005
• Published: 09/08/2005
• Est. Priority Date: 02/04/2004
• Status: Abandoned Application

• Current Assignee: Research Affiliates LLC (Research Affiliates Global Holdings LLC)
• Original Assignee: Research Affiliates LLC (Research Affiliates Global Holdings LLC)
• Inventors: Arnott, Robert D.
• Application Number:
  US11/050,458
• Publication Number:
  US 20050197944A1
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method and apparatus for investing is set forth. Taking the present value of a future liability as the starting point, interest bearing securities or derivatives may be purchased that may have a duration less than that of the future liability, but are purchased in sufficient multiples of so that the duration of the investment, times the multiple, equals the duration of the future liability. The securities or derivatives of less duration will in almost all cases have associated interest rates that are less than that of a similar security or derivative whose duration matches that of the future liabilities. As duration decreases for the available securities or derivatives, interest rates of each will also decrease, but not as rapidly the rate of decrease in duration. By using leverage, securities or derivatives can be purchased in amounts such that the duration of the investment will match that of the future liabilities, but the total amount of interest available from the leveraged investment will exceed that for a similar instrument whose duration matches that of the future liabilities.

Claims

1. A computer system for generating a correlated investment comprising:

a host processor adapted to discount to present value one or more future liabilities at a discount rate of a bond that matures at the same time as said one or more future liabilities, and to generate a correlated investment using an original investment amount and leverage funds.

2. The computer system according to claim 1, wherein said host processor is further adapted to monitor market information about a bond market by communicating with an exchange computer, and to recalibrate said correlated investment according to said market information.

3. The computer system according to claim 2, wherein said host processor is further adapted to recalibrate said correlated investment comprising being adapted to at least one of buy or sell portions of said correlated investment as indicated by said market information.

4. The computer system according to claim 1, wherein said host processor is further adapted to generate returns from said correlated investment, wherein said returns are greater than returns of a zero-coupon bond that matures at a same time as said one or more future liabilities.

5. A computer-implemented method for generating a correlated investment comprising:

discounting to present value one or more future liabilities at a discount rate of a bond that matures at the same time as said one or more future liabilities;

generating a correlated investment using an original investment amount and leverage funds;

monitoring market information about a bond market using a computer;

recalibrating said correlated investment using said computer according to said market information comprising;

recommending at least one of buying or selling portions of said correlated investment as indicated by said market information.

6. The method according to claim 5, further comprising:

generating returns from said correlated investment, wherein said returns are greater than returns of a zero-coupon bond that matures at a same time as said one or more future liabilities.

7. A computer-implemented method for generating a correlated investment comprising:

aligning a net asset value of a correlated investment with a present value of a future liability comprising matching a duration of said correlated investment to a duration of said future liability; and

changing the net asset value of said correlated investment in a highly correlated manner with a change in the present value of said future liability.

8. The method according to claim 7, further comprising:

generating returns from said correlated investment, wherein said returns are greater than returns of a zero-coupon bond that matures at a same time as completion of the duration of said future liability.

9. The method according to claim 7, wherein said changing comprises:

monitoring market information; and

recalibrating said correlated investment based on said market information.

10. The method according to claim 7, wherein said future liability comprises a stream of one or more future liabilities.

11. The method according to claim 7, wherein said aligning comprises:

discounting a future value of the said future liability to a present value using a discount rate.

12. The method according to claim 11, wherein said discounting by said discount rate comprises discounting by a rate equal to a yield of a zero-coupon Treasury bond, said Treasury bond maturing at a same time as said future liability.

13. A computer program product embodied on a computer readable media, the product adapted to enable a computer processor to perform a method for generating a correlated investment, said method comprising:

discounting to present value one or more future liabilities at a discount rate of a bond that matures at the same time as said one or more future liabilities;

generating a correlated investment using an original investment amount and leverage funds;

monitoring market information about a bond market using a computer;

recalibrating said correlated investment using said computer according to said market information comprising;

recommending at least one of buying or selling portions of said correlated investment as indicated by said market information.

14. The computer program product according to claim 13, wherein the method further comprises:

generating returns from said correlated investment, wherein said returns are greater than returns of a zero-coupon bond that matures at a same time as completion of the duration of said future liability.

15. The computer program product according to claim 13, wherein said changing of the method comprises:

monitoring market information; and

recalibrating said correlated investment based on said market information.

16. The computer program product according to claim 13, wherein said future liability comprises a stream of one or more future liabilities.

17. The computer program product according to claim 13, wherein said aligning of the method comprises:

discounting a future value of the said future liability to a present value using a discount rate.

18. The computer program product according to claim 17, wherein said discount rate comprises a yield of a zero-coupon Treasury bond, said Treasury bond maturing at a same time as said future liability.

19. A system for generating a correlated investment comprising:

means for discounting to present value one or more future liabilities at a discount rate of a bond that matures at the same time as said one or more future liabilities;

means for generating a correlated investment using an original investment amount and leverage funds;

means for monitoring market information about a bond market using a computer;

means for recalibrating said correlated investment using said computer according to said market information comprising;

means for recommending at least one of buying or selling portions of said correlated investment as indicated by said market information.

20. A system adapted to generate a correlated investment comprising:

a host computer adapted to discount to present value one or more future liabilities at a discount rate of a bond that matures at the same time as said one or more future liabilities, to generate a correlated investment using an original investment amount and leverage funds, to monitor market information about a bond market, to recalibrate said correlated investment according to said market information, by being adapted to at least one of buy or sell portions of said correlated investment as indicated by said market information.