System and method for determination of incremental value at risk for securities trading
First Claim
1. A computer readable memory storing thereon a computer program for controlling the execution of a processor to determine whether any candidate trade in a selected trading interval reduces a value at risk measure of a trading portfolio having a selected financial instruments, the computer program controlling the processor to:
- determine the value at risk measure for the trading portfolio once with respect to the trading interval;
determine a derivative vector of the value at risk measure;
determine a set of cashflows for the candidate trade;
determine an incremental value at risk measure for a candidate trade from the derivative vector of the value at risk measure and the set of cashflows for the candidate trade; and
,determine from the sign of the incremental value at risk measure whether the value at risk measure of the trading portfolio is reduced by the candidate trade.
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Accused Products
Abstract
A system, method, and product determines the incremental impact of any number of candidate trades on the value at risk (VaR) measure of a trading portfolio within a trading interval, without requiring that the VaR measure be redetermined individually with respect to each candidate trade. The method includes determining the VaR measure for the trading portfolio, and determining a derivative vector quantity for the VaR measure. For each candidate trade, the impact of the candidate trade on the VaR measure is determined as the vector product of the derivative vector and the mapped cashflows of the candidate trade. A negative sign indicates a desirable reduction in the VaR measure. This determination may be made for any number of candidate trades without having to re-determine the VaR measure. The software product employs this method in a financial analysis application in an optimized implementation. The system includes the software product along with databases storing the trading portfolio(s). Additionally, the method and product allow each candidate trade to be normalized with respect to selected criteria, so that a number of individual candidate trades may be ranked with respect to their incremental impact on the VaR measure to determine the candidate trade the best reduces the VaR measure.
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Citations
33 Claims
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1. A computer readable memory storing thereon a computer program for controlling the execution of a processor to determine whether any candidate trade in a selected trading interval reduces a value at risk measure of a trading portfolio having a selected financial instruments, the computer program controlling the processor to:
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determine the value at risk measure for the trading portfolio once with respect to the trading interval; determine a derivative vector of the value at risk measure; determine a set of cashflows for the candidate trade; determine an incremental value at risk measure for a candidate trade from the derivative vector of the value at risk measure and the set of cashflows for the candidate trade; and
,determine from the sign of the incremental value at risk measure whether the value at risk measure of the trading portfolio is reduced by the candidate trade. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14)
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15. A computer readable memory storing thereon a computer program for controlling the execution of a processor to determine an incremental impact of a candidate trade on a value at risk measure of a trading portfolio P having selected financial instruments, the computer program controlling the processor to:
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determine the value at risk measure VaR once for the trading portfolio for a selected trading interval; determine the derivative vector of the value at risk measure VaR once for the trading portfolio for the selected trading interval; determine a set of cashflows for the candidate trade; determine the incremental impact of the candidate trade on the value at risk measure VaR from the product of the derivative vector and the set of cashflows for the candidate trade. - View Dependent Claims (16, 17, 18)
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19. A computer implemented method of determining whether any candidate trade in a selected trading interval reduces a value at risk measure of a trading portfolio, comprising:
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determining the value at risk measure for the trading portfolio once with respect to the trading interval; determining a derivative vector of the value at risk measure; determining a set of cashflows for the candidate trade; determining an incremental value at risk for a candidate trade from the derivative vector and the set of cashflows for the candidate trade; and
,determining from the sign of the incremental value at risk whether the candidate trade reduces the value at risk measure of the trading portfolio. - View Dependent Claims (20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30)
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31. A computer implemented method of determining an incremental value at risk for a selected set of candidate trades in a trading portfolio during a selected trading interval, comprising:
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determining a value at risk measure for the trading portfolio once with respect to the trading interval; determining a derivative vector of the value at risk measure; determining a set of cashflows for the selected set of candidate trades; determining the incremental value at risk for the selected set of candidate trades from the derivative vector and the set of cashflows for the selected set of candidate trades. - View Dependent Claims (32)
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33. A computer readable memory storing thereon a computer program for controlling the execution of a processor to determine an incremental value at risk for a selected set of candidate trades in a trading portfolio during a selected trading interval, the computer program controlling the processor to:
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determine a value at risk measure for the trading portfolio once with respect to the trading interval; determine a derivative vector of the value at risk measure; determine a set of cashflows for the selected set of candidate trades; determine the incremental value at risk for the selected set of candidate trades from the derivative vector and the set of cashflows for the selected set of candidate trades.
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Specification