Systems and methods for calculating reserve capital requirements

• US 20070143197A1
• Filed: 12/19/2005
• Published: 06/21/2007
• Est. Priority Date: 12/19/2005
• Status: Abandoned Application

• Current Assignee: Morgan Stanley
• Original Assignee: Morgan Stanley
• Inventors: Ineke, Jackie, Vincent, Conrad
• Application Number:
  US11/311,002
• Publication Number:
  US 20070143197A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 10/04 Forecasting or optimisation specially adapted for administrative or management purposes, e.g. linear programming or "cutting stock problem" market predictions or forecasting for commercial activities G06Q30/0202
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

Computer assisted methods of estimating a future market value of a financial asset. The methods may comprise the steps of determining, with a computer system, a future reserve capital requirement for the financial asset under a future regulatory framework and determining a future profitability metric for the financial asset considering a present market value of the financial asset and the future reserve capital requirement. In various embodiments, the methods may also include the steps of determining, with the computer system, a present reserve capital requirement for the financial asset under a present regulatory framework and determining, with the computer system, a present return on equity for the financial asset considering the present market value and the present reserve capital requirement.

Claims

1. A computer assisted method of estimating a future market value of a financial asset, the method comprising:

determining, with a computer system, a future reserve capital requirement for the financial asset under a future regulatory framework; and

determining, with the computer system, a future profitability metric for the financial asset considering a present market value of the financial asset and the future reserve capital requirement.

2. The method of claim 1, further comprising:

determining, with the computer system, a present reserve capital requirement for the financial asset under a present regulatory framework; and

determining, with the computer system, a present profitability metric for the financial asset considering the present market value and the present reserve capital requirement.

3. The method of claim 2, wherein the present regulatory framework is the Basel I framework.

4. The method of claim 2, further comprising determining a predicted direction of change between the present market value and a future market value of the financial asset.

5. The method of claim 2, further comprising determining a break-even market value of the financial asset.

6. The method of claim 2, further comprising determining a predicted future market value of the financial asset.

7. The method of claim 6, wherein determining a predicted future market value of the financial asset includes considering the present profitability metric and the future reserve capital requirement.

8. The method of claim 1, wherein the financial asset is selected from the group consisting of a fixed income security, a securitized asset, a derivative and a collateral-backed asset.

9. The method of claim 1, wherein the market value of the financial asset includes at least one of the group consisting of a spread to a reference interest rate and a price.

10. The method of claim 1, wherein the future profitability metric includes a Return on Equity (ROE).

11. The method of claim 1, wherein the future regulatory framework is the Basel II framework.

12. The method of claim 1, wherein the future regulatory framework is a successor to the Basel II framework.

13. A computer assisted method of estimating a future market value of a financial asset, the method comprising:

determining, with a computer system, a Basel II reserve capital requirement for the financial asset under the Basel II regulatory framework;

determining, with the computer system, a Basel I reserve capital requirement for an asset under the Basel I regulatory framework; and

determining, with the computer system, a break-even market value for the financial asset, where a present return on equity of the financial asset considering the Basel I reserve capital requirement and a present market value of the financial asset is about equal to a future return on equity considering the Basel II reserve capital requirement and the break-even market value of the financial asset.

14. The method of claim 13, wherein the financial asset is a fixed-income security and at least the present market value includes a spread to a reference interest rate.

15. The method of claim 13, wherein the financial asset is selected from the group consisting of a fixed income security, a securitized asset, a derivative and a collateral-backed asset.

16. A computer assisted method for determining the direction of change between a present market value of a financial asset and a future market value of the financial asset, the method comprising:

determining, with a computer system, a reserve capital requirement for the financial asset;

determining, with the computer system, a profitability metric for the financial asset considering the reserve capital requirement and the present market value of the financial asset; and

comparing the profitability metric for the financial asset with a baseline profitability metric for the financial asset, with the computer system.

17. The method of claim 16, further comprising determining the direction of change between the present market value of the financial asset and the future market value of the financial asset based on whether the profitability metric from the financial asset is higher than the baseline profitability metric for the financial asset.

18. The method of claim 16, wherein the profitability metric includes a return on equity (ROE).

19. The method of claim 16, wherein the market value of the financial asset includes at least one of a price and a spread to a reference interest rate.

20. The method of claim 16, wherein the baseline profitability metric includes a historical average of profitability metrics for the financial asset.

21. The method of claim 16, wherein the baseline profitability metric is an estimation of the minimum profitability metric of the financial asset at which a bank can hold the financial asset and make a profit.

22. A computer assisted method for designing a financial asset, the method comprising:

determining, with a computer system, a reserve capital requirement for a first iteration of the financial asset;

determining, with the computer system, a profitability metric for the first iteration of the financial asset considering the reserve capital requirement and the present market value of the financial asset; and

developing, at least in part with the computer system, a second iteration of the financial asset based on the reserve capital requirement and the profitability metric.

23. A system for estimating a future market value of a financial asset, the system comprising:

a future reserve capital module configured to determine a future reserve capital requirement for the financial asset under a future regulatory framework; and

a profitability metric module configured to determine a future profitability metric for the financial asset considering a present market value of the financial asset and the future reserve capital requirement.

24. The system of claim 23, further comprising:

a present reserve capital module configured to determine a present reserve capital requirement for the financial asset under a present regulatory framework; and

wherein the profitability metric module is also configured to determine a present return on equity for the financial asset considering the present market value and the present reserve capital requirement.

25. A computer-assisted method for estimating a future market value of a financial asset, the method comprising:

receiving an indicator of a financial asset from a user over a network;

determining a future reserve capital requirement for the financial asset under a future regulatory framework;

determining a future profitability metric for the financial asset considering a present market value of the financial asset and the future reserve capital requirement.

26. The method of claim 25, further comprising sending the future profitability metric for the financial asset to the user over the network.

27. The method of claim 25, wherein the future regulatory framework is the Basel II framework.