FOR AND METHOD OF PROVIDING PORTFOLIO RISK INFORMATION TO INVESTORS WITHOUT REVEALING POSITION INFORMATION

• US 20100145875A1
• Filed: 12/10/2008
• Published: 06/10/2010
• Est. Priority Date: 12/10/2008
• Status: Active Grant

• Current Assignee: RiskMetrics Solutions Incorporated (Exela Technologies, Inc.)
• Original Assignee: Riskmetrics Group Incorporated (Exela Technologies, Inc.)
• Inventors: Benson, Pete, Berman, Gregg E., Schmid, Brian
• Granted Patent: US 8,924,274 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system for and method of providing investors with risk information regarding a portfolio, while protecting a strategy associated with the portfolio from public disclosure, is presented. The information allows investors to calculate a variety of risk statistics at virtually any level of granularity in analyzing divisions of the portfolio. The system and method also provide benefits for portfolio managers. Specifically, a portfolio manager may release detailed simulated returns, from which investors may calculate a variety of risk statistics, without revealing position information sufficient for the investors to reverse engineer a strategy associated with the portfolio.

Claims

1. A computer implemented system for providing risk information of a portfolio to an investor without revealing positions in the portfolio to at least the investor, wherein the portfolio is controlled by one or more portfolio managers, the system comprising:

a first computer programmed to accept from the one or more portfolio managers position information reflecting contents of the portfolio;

a second computer programmed to calculate a plurality of simulated returns for the portfolio based on a deterministic set of scenario parameters;

a third computer programmed to calculate a non-aggregatable risk statistic for the portfolio based on the simulated returns; and

a fourth computer programmed to provide the investor access to the plurality of simulated returns, the deterministic set of scenario parameters and the non-aggregatable risk statistic, wherein the system is configured to prevent the investor from accessing the position information.

2. The system of claim 1, wherein the non-aggregatable risk statistic is a value at risk or an expected shortfall.

3. The system of claim 1, wherein the non-aggregatable risk statistic is accrued interest, beta, delta, delta equivalents, stress test present value delta, bond equivalents, break-even inflation, clean present value, modified convexity, credit grade asset volatility, credit spread, discrete real yield, diversification benefit, dollar delta, dollar total gamma, duration, effective convexity, factor loadings, factor loadings contributions, factor loading statistical significance, factor R-squared, future value, exposure, generalized present value of basis point, Greek sensitivities, idiosyncratic option-adjusted spread, issuer option-adjusted spread, marginal risk grade, marginal standard deviation, market cap weighted risk grade, maximum credit exposure, mixed portfolio risk attribution, notional, par-yield sensitivity, position count, present value, recovery rate, risk attribution present value, risk grade, shortfall probability, spread convexity, spread duration, standard deviation, standard deviation of credit exposure or yield.

4. The system of claim 1, wherein at least a portion of the deterministic set of scenario parameters is generated using a pseudorandom number generator.

5. The system of claim 1, wherein the first computer and the second computer are on a premises of the one or more portfolio managers.

6. The system of claim 1 or 5, wherein the third computer is not provided with access to the position information.

7. The system of claim 1, further comprising a fifth computer configured to present a screen to investors that provides investor with access to a definition of a technique used by the second computer to calculate the plurality of simulated returns.

8. The system of claim 1, further comprising a fifth computer configured to present a screen to the investor that provides the investor with access to the deterministic set of scenario parameters.

9. The system of claim 1, wherein the first computer is configured to present a web page to the one or more portfolio managers configured to accept the position information reflecting contents of the portfolio.

10. The system of claim 1, wherein the fourth computer is configured to present a web page to the investor, the web page providing the investor the access to the plurality of simulated returns.

11. A computer implemented method of providing an investor with detailed risk statistics regarding a portfolio without revealing position information to the investor, wherein the portfolio is managed by a manager, the method comprising:

providing, by a first computer and to the investor, a plurality of simulated returns, a description of a mathematical model used to generate the simulated returns, and a portion of parameters input into the mathematical model to generate the simulated returns, wherein the investor is not provided access to portfolio position information;

providing, to the investor, access to an analytical engine, wherein the analytical engine is configured to access the plurality of simulated returns, wherein the analytical engine is configured to calculate a non-aggregatable risk statistic based on the simulated returns according to instructions from the investor;

calculating, by the analytical engine, the non-aggregatable risk statistic based on the instructions; and

providing the investor access, via a third computer, to the non-aggregatable risk statistic calculated by the analytical engine.

12. The method of claim 11, further comprising computing, by an analytical engine, the plurality of simulated returns based on portfolio position information supplied by the manager.

13. The method of claim 12, wherein the analytical engine is located on a premises of the manager.

14. The method of claim 12, wherein the analytical engine is located on a premises of a third party.

15. The method of claim 11, wherein the non-aggregatable risk statistic is a value at risk or an expected shortfall.

16. The method of claim 11, wherein the non-aggregatable risk statistic is accrued interest, beta, delta, delta equivalents, stress test present value delta, bond equivalents, break-even inflation, clean present value, modified convexity, credit grade asset volatility, credit spread, discrete real yield, diversification benefit, dollar delta, dollar total gamma, duration, effective convexity, factor loadings, factor loadings contributions, factor loading statistical significance, factor R-squared, future value, exposure, generalized present value of basis point, Greek sensitivities, idiosyncratic option-adjusted spread, issuer option-adjusted spread, marginal risk grade, marginal standard deviation, market cap weighted risk grade, maximum credit exposure, mixed portfolio risk attribution, notional, par-yield sensitivity, position count, present value, recovery rate, risk attribution present value, risk grade, shortfall probability, spread convexity, spread duration, standard deviation, standard deviation of credit exposure or yield.

17. The method of claim 11, wherein at least a portion of the parameters are generated using a pseudorandom number generator.

18. The method of claim 11, wherein the analytical engine is not provided with access to the position information.

19. The method of claim 11, wherein the third computer and the analytical engine are the same computer.

20. The method of claim 11, wherein the step of providing, by a first computer and to the investor, a plurality of simulated returns, a description of a mathematical model used to generate the simulated returns, and a portion of parameters input into the mathematical model to generate the simulated returns, comprises serving the investor a web page.

21. The method of claim 11, wherein the step of providing the investor access, via a third computer, to the non-aggregatable risk statistic calculated by the analytical engine, comprises serving the investor a web page.