Computer-implemented method and apparatus for portfolio compression

• US 6,278,981 B1
• Filed: 05/28/1998
• Issued: 08/21/2001
• Est. Priority Date: 05/29/1997
• Status: Expired due to Term

• Current Assignee: International Business Machines Corporation
• Original Assignee: Algorithmics International Corporation
• Inventors: Dembo, Ron Samuel, Kreinin, Alexander Yacov, Rosen, Dan
• Primary Examiner(s): Hafiz, Tariq R.
• Assistant Examiner(s): MEINECKE DIAZ, SUSANNA M
• Application Number:
  US09/084,923
• Time in Patent Office: 1,181 Days
• Field of Search: 705/36, 705/37
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer-implemented method for compressing a portfolio of financial instruments is described. Financial instruments to be compressed are identified, and a compressed subportfolio corresponding to the identified financial instruments is generated. The compressed subportfolio and any non-compressed financial instruments are then combined into a compressed portfolio.

Claims

1. A computer-implemented method for compressing a portfolio of financial instruments for purposes of portfolio management, the method comprising the steps of:

selecting one or more financial instruments to be compressed from among a plurality of financial instruments in an original portfolio;

generating a compressed subportfolio from the selected financial instruments, wherein said generating includes replacing a subset of the selected financial instruments with a synthetic financial instrument capable of replicating an aggregate behavior of the replaced subset;

combining the compressed subportfolio and any non-compressed financial instruments from the original portfolio into a compressed portfolio;

calculating a measure of risk for the compressed portfolio; and

performing risk management of the original portfolio based on the calculated measure of risk for the compressed portfolio.

2. The computer-implemented method of claim 1, wherein the selected financial instruments comprise all of the financial instruments in the original portfolio.

3. The computer-implemented method of claim 1, wherein said step of generating a compressed subportfolio comprises performing analytical compression.

4. The computer-implemented method of claim 1, wherein said step of generating a compressed subportfolio comprises performing scenario-based compression.

5. The computer-implemented method of claim 1, further comprising the steps of:

sorting the selected financial instruments into fixed cashflow financial instruments and non-fixed cashflow financial instruments;

generating one or more aggregated cashflow instruments representing the fixed cashflow financial instruments;

generating a first compressed subportfolio corresponding to the one or more aggregated cashflow instruments; and

generating a second compressed subportfolio corresponding to the non-fixed cashflow financial instruments.

6. The computer-implemented method of claim 1, further comprising the step of sorting the selected financial instruments into a plurality of subportfolios to be compressed, wherein said step of generating a compressed subportfolio further comprises separately compressing each of the plurality of subportfolios to be compressed.

7. The computer-implemented method of claim 6, wherein said compressing step further comprises using a first compression methodology to compress one of the plurality of subportfolios to be compressed and a different compression methodology to compress another of the plurality of subportfolios to be compressed.

8. The computer-implemented method of claim 6, wherein said step of sorting the selected financial instruments into a plurality of subportfolios to be compressed comprises separating the selected financial instruments according to a predetermined attribute of the financial instruments.

9. The computer-implemented method of claim 8, further comprising the step of obtaining the predetermined attribute from an external input.

10. The computer-implemented method of claim 1, wherein said step of generating a compressed subportfolio comprises applying a plurality of compression methodologies.

11. A computer-implemented apparatus for generating a compressed portfolio corresponding to an original portfolio of financial instruments, the compressed portfolio being configured to replicate an aggregate behavior of the original portfolio when used to calculate a measure of risk for purposes of performing risk management of the original portfolio, said apparatus comprising:

a processor;

an input device coupled to said processor;

a memory coupled to said processor;

a compression engine including instructions executable by said processor, said instructions being configured to generate a compressed portfolio from an original portfolio comprising a plurality of financial instruments, wherein generation of the compressed portfolio comprises generating a compressed subportfolio corresponding to one or more financial instruments selected from among the plurality of financial instruments in the original portfolio, said generating the compressed subportfolio including replacing a subset of the selected financial instruments with a synthetic financial instrument capable of replicating an aggregate behavior of the replaced subset, and combining the compressed subportfolio and any non-compressed financial instruments from the original portfolio into a compressed portfolio; and

an output device.

12. The computer-implemented apparatus of claim 11, wherein said compression engine comprises:

an instrument load module;

a sorting module;

a compression module; and

an aggregation module.

13. The computer-implemented apparatus of claim 12, wherein said compression module comprises a plurality of sub-modules respectively corresponding to a plurality of impression methodologies.

14. The computer-implemented apparatus of claim 11, wherein said compression engine comprises:

an instrument load module;

a sorting module coupled to said instrument load module;

a cashflow generation module coupled to said sorting module;

a first aggregation module coupled to said cashflow generation module;

a compression module coupled to said sorting module and said cashflow generation module; and

a second aggregation module coupled to said sorting module and said compression module.

15. The computer-implemented apparatus of claim 11, wherein said input device comprises a user interface.

16. The computer-implemented apparatus of claim 11, wherein said input device comprises a real-time data feed.

17. A computer-readable storage medium embodied in a computer and containing a set of instructions for causing a computer to compress a portfolio of financial instruments, said set of instructions including instructions for:

selecting one or more financial instruments to be compressed from among a plurality of financial instruments in an original portfolio;

generating a compressed subportfolio from the selected financial instruments, wherein said generating includes replacing a subset of the selected financial instruments with a synthetic financial instrument capable of replicating an aggregate behavior of the replaced subset;

combining the compressed subportfolio and any non-compressed financial instruments from the original portfolio into a compressed portfolio;

calculating a measure of risk for the compressed portfolio; and

performing risk management of the original portfolio based on the calculated measure of risk for the compressed portfolio.

18. The storage medium of claim 17, wherein said set of instructions further comprises instructions for:

sorting the selected financial instruments into fixed cashflow financial instruments and non-fixed cashflow financial instruments;

generating one or more aggregated cashflow instruments representing the fixed cashflow financial instruments;

generating a first compressed subportfolio corresponding to the one or more aggregated cashflow instruments; and

generating a second compressed subportfolio corresponding to the non-fixed cashflow financial instruments.

19. The storage medium of claim 17, wherein said storage medium comprises a magnetic storage device.

20. The storage medium of claim 17, wherein said storage medium comprises a computer memory.