System and method for relative-volatility linked portfolio adjustment

• US 20060271452A1
• Filed: 05/25/2005
• Published: 11/30/2006
• Est. Priority Date: 05/25/2005
• Status: Abandoned Application

• Current Assignee: Panayotis Takis Sparaggis
• Original Assignee: Panayotis Takis Sparaggis
• Inventors: Sparaggis, Panayotis Takis
• Application Number:
  US11/136,928
• Publication Number:
  US 20060271452A1
• 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 40/06 Asset management; Financial planning or analysis

Abstract

A method of structuring a guaranteed financial product on a risk asset using a computer comprising: a) introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset; b) analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period; c) applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset; and d) removing said asset adjustment when said volatility level of said risk asset falls below said predetermined level defined by the volatility level attained in c).

Claims

1. A method of structuring a guaranteed financial product on a risk asset using a computer comprising:

a) introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset; and

d) removing said asset adjustment when said volatility level of said risk asset falls below said predetermined level defined by the volatility level attained in c).

2. The method of claim 1 further comprising entering a volatility transaction to hedge unexpected changes in volatility of said reference asset beyond said predetermined level of c).

3. The method of claim 2 wherein said volatility transaction is a volatility swap.

4. The method of claim 1 further comprising:

analyzing historical volatility levels and correlations between said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

5. The method of claim 1 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

6. The method of claim 1 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.

7. A method of structuring a guaranteed financial product on a risk asset using a computer comprising:

a) introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset;

d) removing said asset adjustment when said volatility level of said risk asset falls below said predetermined level defined by the volatility level attained in c); and

e) entering a volatility transaction to hedge unexpected changes in volatility of said reference asset above said predetermined level of c).

8. The method of claim 7 wherein said volatility transaction is a volatility swap.

9. The method of claim 7 further comprising:

analyzing historical volatility levels and correlations between said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

10. The method of claim 7 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

11. The method of claim 7 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.

12. A method of structuring a guaranteed financial product on a risk asset using a computer comprising:

a) introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset;

d) removing said asset adjustment when said volatility level of said risk asset falls below said predetermined level defined by the volatility level attained in c); and

e) analyzing historical volatility levels for said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

13. The method of claim 12 further comprising entering a volatility transaction to hedge unexpected changes in volatility of said reference asset beyond said predetermined level of c).

14. The method of claim 13 wherein said volatility transaction is a volatility swap.

15. The method of claim 12 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

16. The method of claim 12 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.

17. A system for structuring a guaranteed financial product on a risk asset using a computer comprising:

a) a component for introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) a component for analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) a component for applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset; and

d) a component for removing said asset adjustment when said volatility level of said risk asset falls below said predetermined defined by the volatility level attained in c).

18. The system of claim 17 further entering a volatility transaction to hedge unexpected changes in volatility of said reference asset beyond said predetermined level of c).

19. The system of claim 18 wherein said volatility transaction is a volatility swap.

20. The system of claim 17 further comprising:

a component for analyzing historical volatility levels and correlations between said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

21. The system of claim 17 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

22. The system of claim 17 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.

23. A system for structuring a guaranteed financial product on a risk asset using a computer comprising:

a) a component for introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) a component for analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) a component for applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset;

d) a component for removing said asset adjustment when said volatility level of said risk asset falls below said a predetermined level defined by the volatility level attained in c); and

e) entering a volatility transaction to hedge unexpected changes in volatility of said reference asset above said predetermined level of c).

24. The system of claim 23 wherein said volatility transaction is a volatility swap.

25. The system of claim 23 further comprising:

a component for analyzing historical volatility levels and correlations between said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

26. The system of claim 23 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

27. The system of claim 23 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.

28. A system for structuring a guaranteed financial product on a risk asset using a computer comprising:

a) a component for introducing a reference asset being another risk asset having a secondary derivative market which is better developed and more liquid than said secondary derivative market of said risk asset;

b) a component for analyzing and comparing the volatility level of said risk asset and of said reference asset over a predetermined time period;

c) a component for applying an asset adjustment when said volatility level of said risk asset exceeds a predetermined level defined by said volatility level of said reference asset;

d) a component for removing said asset adjustment when said volatility level of said risk asset falls below said predetermined level defined by the volatility level attained in c); and

e) a component for analyzing historical volatility levels for said risk asset and potential reference asset candidates to select one of said reference asset candidates as said reference asset.

29. The system of claim 28 further comprising entering a volatility transaction to hedge unexpected changes in volatility of said reference asset beyond said predetermined level of c).

30. The system of claim 29 wherein said volatility transaction is a volatility swap.

31. The system of claim 28 wherein said risk asset is selected from the group consisting of hedge funds, fund of funds, mutual funds, closed-end funds, managed investment accounts, and partnerships.

32. The system of claim 28 wherein said reference asset is selected from the group consisting of equities, fixed-income securities, currencies, equity indices, fixed-income indices, currency indices, and economic variables and indices.