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

• US 20070043643A1
• Filed: 08/24/2006
• Published: 02/22/2007
• Est. Priority Date: 02/04/2004
• Status: Active Grant

• Current Assignee: Research Affiliates LLC (Research Affiliates Global Holdings LLC)
• Original Assignee: Research Affiliates LLC (Research Affiliates Global Holdings LLC)
• Inventors: Arnott, Robert
• Granted Patent: US 7,778,905 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer program product embodied on a computer readable medium may enable a computer processor to perform a method for generating a correlated investment. The method may include the steps of: discounting to present value one or more future liabilities at a discount rate of a bond that matures at the same time as the future liabilities; generating a correlated investment using an original investment amount and leverage funds; monitoring market information about a bond market using a computer; and recalibrating the correlated investment using the computer according to the market information, including: recommending at least one of buying or selling portions of the correlated investment as indicated by the market information. The future liabilities may be of a duration greater than the duration of the longest available bond issued by a sovereign.

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 of any duration at a discount rate of a bond that matures at the same time as said one or more future liabilities, wherein said one or more future liabilities has a duration greater than the duration of the longest available bond issued by a sovereign, 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 and/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.

21. The system according to claim 1, wherein said duration of said liability exceeds the longest available STRIPS bond issued by any applicable sovereign.

22. The system according to claim 21, wherein said applicable sovereign comprises at least one of a National Treasury, U.S. Treasury, a state, a county, a city, a town, and/or a municipality.

25. The system according to claim 21, wherein said applicable sovereign comprises at least one of a National Treasury, U.S. Treasury, a state, a county, a city, a town, and/or a municipality.

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

discounting to present value one or more future liabilities of a duration greater than the longest available bond issued by a sovereign 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; and

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, wherein said duration of said future liability is greater than the duration of the longest available bond issued by a sovereign; 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 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, said one or more future liabilities of a duration greater than the duration of the longest available bond issued by a sovereign;

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

monitoring market information about a bond market using a computer; and

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 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, said one or more future liabilities of a duration greater than the duration of the longest available bond issued by a sovereign;

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; and

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, said one or more future liabilities of a duration greater than the duration of the longest available bond issued by a sovereign, 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.

23. A computer implemented method of generating a correlated investment for a future liability of a duration greater than a duration of a longest conventional bond, comprising:

discounting to present value via a processor a future liability having a duration greater than the duration of the longest available bond issued by a sovereign; and

purchasing an investment comprising at least one of an interest bearing security, and/or a derivative, said investment having a duration less than that of the future liability, but being purchased in a sufficient multiple so that the multiplicative product of said duration of said investment and said multiple, equals said duration of said future liability.

24. The system according to claim 23, wherein said duration of said liability exceeds the longest available STRIPS bond issued by any applicable sovereign.

26. A computer implemented method comprising:

matching a duration of a liability with a bond or a portfolio of bonds having the same duration as said duration of said liability, wherein said duration of said liability is longer than the longest available STRIPS bond.

27. A computer implemented method comprising:

defeasing a liability using one or more fixed income instruments whose duration matches the duration of the liability, wherein a duration of said one or more fixed income instruments exceeds the duration of the longest duration available STRIPS bond.