Rapid method of analysis for correlation of asset return to future financial liabilities

• US 6,336,103 B1
• Filed: 08/02/1989
• Issued: 01/01/2002
• Est. Priority Date: 08/02/1989
• Status: Expired due to Fees

• Current Assignee: NISA Investment Advisors LLC (Parkridge, Inc.)
• Original Assignee: NISA Investment Advisors LLC (Parkridge, Inc.)
• Inventors: Baker, Nardin L.
• Primary Examiner(s): Cosimano, Edward R.
• Application Number:
  US07/389,382
• Time in Patent Office: 4,535 Days
• Field of Search: 364/408, 705/35, 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method and system for correlating an expected asset return of a portfolio to changes in future financial liabilities and also to other financial indices. Management of asset portfolios often requires precise matching of liability streams, such as is the insurance industry and for pension funds. The method selects the weight percentages of assets by achieving optimum statistical correlation between asset returns and liability returns.

Claims

1. A computer for managing a pension plan'"'"'s portfolio of assets, comprising:

computer hardware means for ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

computer hardware means for ascertaining the past behavior of current pension plan liabilities projected backwards in time;

computer hardware means for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index;

said computer hardware means for determining a particular portfolio of equity stocks having;

(a) means for performing computer programming commands for selecting a starting portfolio of equity stocks;

(b) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(c) means for performing computer programming commands for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities; and

(d) means for performing computer programming commands for reaccessing (b) and (c) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

2. Apparatus for providing an optimal portfolio of equity stocks for insurance plan management, said apparatus comprising:

computer means and memory means coupled to said computer means for storing information for use by said computer means;

said computer means having;

(a) means for ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for ascertaining the past behavior of current pension plan liabilities projected backwards in time;

(c) means for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index including;

(1) means for selecting a starting portfolio of equity stocks;

(2) means for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for determining a correlation of the past behavior of said insurance plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past insurance plan liabilities; and

(4) means for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

3. Apparatus for providing an optimal portfolio of equity stocks for pension plan management, said apparatus comprising:

computer means for performing electrical signal processing and memory means coupled to said computer means for storing information for use by said computer means;

said computer means being programmed to generate electrical signals including;

(a) electrical signals characteristic of a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) electrical signals characteristic of the past behavior of current pension plan liabilities projected backwards in time;

(c) electrical signals characteristic of a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index by electrical computer control command means having;

(1) means for selecting a starting portfolio of equity stocks;

(2) means for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities; and

(4) means for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index, resulting in a set of electrical signals characteristic of said portfolio of assets.

4. A computer for managing an insurance plan'"'"'s portfolio of assets, comprising:

computer hardware means for ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

computer hardware means for ascertaining the past behavior of current insurance plan liabilities projected backwards in time;

computer hardware means for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index;

said computer hardware means for determining a particular portfolio of equity stocks by accessing electronic signal processing components having;

(a) means for performing computer programming commands for selecting a starting portfolio of equity stocks with said commands implemented through electronic signals in said computer hardware means;

(b) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(c) means for performing computer programming commands for determining a correlation of the past behavior of said insurance plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past insurance plan liabilities; and

(d) means for performing computer programming commands for reaccessing (b) and (c) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

5. A computer for managing a pension plan'"'"'s portfolio of assets, comprising:

computer hardware means for numeric processing of electrical signals;

said numeric processing being performed by manipulation and recognition of said electrical signals having two voltage levels characteristic of binary computer processing;

said numeric processing of said electrical signals performed by said computer hardware means having;

(a) means for operating on input data ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for ascertaining by use of input data the past behavior of current pension plan liabilities projected backwards in time;

(c) means for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index by carrying out a computer program comprised of generating said electrical signals in said computer hardware means arising from;

(1) means for performing computer programming commands for selecting a starting portfolio of equity stocks;

(2) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for performing computer programming commands for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities; and

(4) means for performing computer programming commands for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

6. A computer for managing an insurance plan'"'"'s portfolio of assets, comprising:

computer hardware means for numeric processing;

said numeric processing being performed by manipulation and recognition of electrical signals having two voltage levels associated with binary signal processing;

said numeric processing performed by said computer hardware means having;

(a) means for generating said electrical signals to ascertain a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for generating said electrical signals to ascertain the past behavior of current insurance plan liabilities projected backwards in time;

(c) means for generating said electrical signals to determine a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index having;

(1) means for performing computer programming commands for selecting a starting portfolio of equity stocks, said commands thereby causing generation of said electrical signals in said computer hardware means;

(2) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for performing computer programming commands for determining a correlation of the past behavior of said insurance plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past insurance plan liabilities; and

(4) means for performing computer programming commands for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index thereby generating electrical output signals characteristic of said particular portfolio of assets.

7. A computer for managing a pension plan'"'"'s portfolio of assets, comprising:

computer hardware means capable of numeric processing;

said computer hardware means including a read only memory and a random access memory;

said numeric processing involving accessing said read only memory and said random access memory, said numeric processing performed by said computer hardware means having;

(a) means for processing electrical signals in said computer hardware means to ascertain a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for processing electrical signals in said computer hardware means to ascertain the past behavior of current pension plan liabilities projected backwards in time;

(c) means for processing electrical signals in said computer hardware means to determine a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index having;

(1) means for performing computer programming commands for selecting a starting portfolio of equity stocks;

(2) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for performing computer programming commands for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities; and

(4) means for performing computer programming commands for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index thereby generating said electrical signals characteristic of said particular portfolio.

8. A computer for managing an insurance plan'"'"'s portfolio of assets, comprising:

computer hardware means for performing numeric processing;

said computer hardware means including a read only memory and a random access memory and further comprising;

(a) means for processing input data electronically to ascertain a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for processing input data electronically to ascertain the past behavior of current insurance plan liabilities projected backwards in time;

(c) means for processing data electronically to determine a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index;

(d) means for processing data electronically to determine said particular portfolio of equity stocks having;

(1) means for performing computer programming commands for selecting a starting portfolio of equity stocks;

(2) means for performing computer programming commands for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for performing computer programming commands for determining a correlation of the past behavior of said insurance plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past insurance plan liabilities; and

(4) means for performing computer programming commands for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

9. Apparatus for producing a portfolio of equity stocks for pension plan management, said apparatus comprising:

first computer means for converting analog information to electronic signals;

second computer means for manipulating said electronic signals;

memory means for storing said electronic signals coupled to said second computer means for manipulating said electronic signals;

said second computer means manipulating said electronic signals at least partly in response to;

(a) means for performing computer programming commands for ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for performing computer programming commands for ascertaining the past behavior of current pension plan liabilities projected backwards in time;

(c) means for performing computer programming commands for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index having;

(1) means for selecting a starting portfolio of equity stocks;

(2) means for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities; and

(4) means for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index.

10. Apparatus for producing a portfolio of equity stocks for insurance plan management, said apparatus comprising:

first computer means for converting analog information to electronic signals;

second computer means for manipulating said electronic signals;

memory means for storing said electronic signals coupled to said second computer means for manipulating said electronic signals;

said second computer means manipulating said electronic signals at least partly in response to carrying out a program generating electrical signals from;

(a) means for performing computer programming commands for ascertaining a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for performing computer programming commands for ascertaining the past behavior of current pension plan liabilities projected backwards in time;

(c) means for performing computer programming commands for determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index having;

(1) means for selecting a starting portfolio of equity stocks;

(2) means for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for determining a correlation of the past behavior of said insurance plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past insurance plan liabilities; and

(4) means for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index, said portfolio of assets characterized by electrical signals in said computer hardware means.

11. Apparatus for producing a portfolio of equity stocks for pension plan management, wherein said apparatus provides an electrical output signal subsequent to processing an electrical input signal, said apparatus comprising:

electrical processing means for processing the electrical input signal;

memory means for storing information relating to the electrical input signal being coupled to said processing means;

said processing of the electrical input signal by said electrical processing means being controlled in part by;

(a) means for performing computer programming commands generating electrical signals in said apparatus by ascertaining and storing in said memory means a standard actuarial index in terms of characteristic future cash payments discounted to present value based on a range for at least one of discount rate values and wage inflation values;

(b) means for performing computer programming commands generating electrical signals in said apparatus by ascertaining the past behavior of current pension plan liabilities projected backwards in time;

(c) means for performing computer programming commands generating electrical signals in said apparatus by determining a particular portfolio of equity stocks having an optimized combination of risk and financial return for tracking said standard actuarial index having;

(1) means for selecting a starting portfolio of equity stocks and storing electrical signals relating to said equity stocks in said memory means;

(2) means for making a plurality of incremental changes in weight percentages of at least some of said starting portfolio of equity stocks;

(3) means for determining a correlation of the past behavior of said pension plan liabilities with said financial return of said incrementally changed portfolio of equity stocks over the same time period as said past pension plan liabilities;

(4) means for reaccessing (2) and (3) until reaching said particular portfolio of assets having said optimized correlation with said standard index; and

(5) means for converting information relating to said portfolio of stocks to said electrical output signal in said memory means.