Data Analysis Method And Apparatus For Use In Trading Financial Instruments

• US 20100057634A1
• Filed: 08/28/2008
• Published: 03/04/2010
• Est. Priority Date: 08/28/2008
• Status: Abandoned Application

• Current Assignee: TradeHelm Incorporated
• Original Assignee: TradeHelm Incorporated
• Inventors: Janowski, Braden S.
• Application Number:
  US12/200,228
• Publication Number:
  US 20100057634A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 30/02 Marketing; Price estimation or determination; Fundraising
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A unique method and apparatus for analyzing data related to a tradable financial instrument employs a finite state decision tree as a predictive model of future trade prices for the instrument. The decision tree may be multi-layered with each layer divided into nodes representing a range of numerical values. For each layer of the decision tree, a user-selected or user-defined analytic equation/algorithm processes the data into numerical analytic values that are used to populate the nodes of the decision tree. A future price offset is determined for each node. The future price offset represents a prediction for a future price change of the financial instrument and can be used as a basis for trading the instrument.

Claims

1. A method for analyzing data for use in trading a financial instrument, said method comprising:

selecting a financial instrument the trader wishes to trade;

defining an analytic equation for analyzing a set of data to produce a plurality of analytic values, each of said plurality of analytic values being in the form of a number;

wherein the set of data and the analytic equation together constitute a first analytic instance;

dividing said plurality of analytic values into two or more sub-ranges of numbers (nodes); and

determining a future price indicator, representing a prediction for a future price change of the selected financial instrument, for each node to produce a finite state decision tree on which trade decisions related to the financial instrument may be based.

2. The method of claim 1 wherein said set of data includes market data containing pricing information for the financial instrument.

3. The method of claim 2, further comprising the step of recording said market data over time.

4. The method of claim 2, further comprising scrubbing said market data to eliminate unwanted portions of the market data from the set of data.

5. The method of claim 2 wherein said future price indicator is a price offset representing a difference between a current price of the financial instrument and a price of the financial instrument at a later time.

6. The method of claim 5 wherein said later time is 2,000 milliseconds.

7. The method of claim 5 wherein said difference is determined as an average difference.

8. The method of claim 1 wherein said plurality of analytic values are divided into nodes according to user preference.

9. The method of claim 1 wherein said plurality of analytic values are divided into nodes according to a statistical distribution function.

10. The method of claim 9 wherein said statistical distribution function is a Gaussian distribution function.

11. The method of claim 1, further comprising:

performing each of said defining, dividing, and determining steps for a second analytic equation to produce a second analytic instance; and

adding the results from said performing step to the decision tree to produce a multi-level decision tree containing analytical results for the first and second analytical instances.

12. The method of claim 1, further comprising:

performing each of said defining, dividing, and determining steps for a second set of data to produce a second analytic instance; and

adding the results from said performing step to the decision tree to produce a multi-level decision tree containing analytical results for the first and second analytic instances.

13. A method for analyzing market data related to a derivative financial instrument tradable on an electronic exchange, said method comprising:

selecting a derivative financial instrument the trader wishes to trade, said derivative financial instrument having repetitive effective time periods;

defining an analytic equation for analyzing data related to the derivative financial instrument to produce a plurality of analytic values, each of said plurality of analytic values being in the form of a number, each of said time periods defined by a start date representing the beginning of the time period and a stop date representing the end of the time period;

wherein the data and the analytic equation together constitute a first analytic instance;

dividing said plurality of analytic values into two or more sub-ranges of numbers (nodes); and

determining a future price indicator, representing a prediction for a future price change of the derivative financial instrument, for each node to produce a finite state decision tree on which trade decisions related to the derivative financial instrument may be based.

14. The method of claim 13 wherein said data includes market data containing pricing information for the derivative financial instrument.

15. The method of claim 14, further comprising the step of recording said market data over time.

16. The method of claim 14, further comprising scrubnodeg said market data to eliminate unwanted market data.

17. The method of claim 14 wherein said future price indicator is a price offset representing a difference between a current price of the instrument and a price of the instrument at a later time.

18. The method of claim 17 wherein said later time is 2,000 milliseconds.

19. The method of claim 17 wherein said difference is determined as an average difference.

20. The method of claim 13 wherein said plurality of analytic values are divided into nodes according to user preference.

21. The method of claim 13 wherein said plurality of analytic values are divided into nodes according to a statistical distribution function.

22. The method of claim 21 wherein said statistical distribution function is a Gaussian distribution function.

23. The method of claim 13, further comprising:

performing each of said defining, dividing, and determining steps for a second analytic equation to produce a second analytic instance; and

adding the results from said performing step to the decision tree to produce a multi-level decision tree containing analytical results for the first and second analytical instances.

24. A computer-implemented apparatus for use in trading a financial instrument, the apparatus comprising:

a data analysis engine for analyzing a set of data related to the financial instrument according to an analytic equation, said data analysis engine producing a plurality of analytic values, each of said plurality of analytic values being in the form of a number; and

a finite state decision tree generator in communication with said data analysis engine for generating a finite state decision tree from analytic values produced by the data analysis engine by;

dividing said plurality of analytic values into two or more sub-ranges of numbers (nodes); and

determining a future price indicator, representing a prediction for a future price change of the financial instrument, to each node to produce a finite state decision tree on which trade decisions related to the financial instrument may be based.

25. The apparatus of claim 24 wherein said analytic equation is selected from an analytic equation template stored in an electronic data memory in communication with said data analysis engine.

26. The apparatus of claim 24 wherein said finite state decision tree is a multi-level decision tree produced from two or more analytic equations.