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Method of determining optimal asset allocation utilizing asset cash flow simulation

  • US 7,243,081 B2
  • Filed: 02/05/2001
  • Issued: 07/10/2007
  • Est. Priority Date: 10/30/1995
  • Status: Expired due to Fees
First Claim
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1. A computer program product storing computer instructions therein for instructing a computer to determine a substantially optimal asset allocation utilizing cash flow simulation, the computer program product comprising:

  • a recording medium readable by the computer; and

    ,computer instructions stored on said recording medium, wherein the computer instructions instruct the computer to;

    (a) permit a user to select at least one of a risk avoidance weight or a rate of return for a given retirement plan;

    (b) facilitate the selection, by at least one of the user and the computer, of a plurality of asset allocations, wherein the plurality of asset allocations includes at least one of a fixed income or an equity asset;

    (c) determine a performance index for each asset allocation in the selected plurality of asset allocations, wherein the performance index determination is made by;

    i) generating one or more risk tolerance baselines based on one or more user defined risk tolerance factors;

    ii) simulating benefit and asset cash flows as future financial projections based on plan benefit cashflows and each asset allocation in the selected plurality of asset allocations;

    iii) determining if at least one risk tolerance failure occurs by comparing the future financial projections with the one or more risk tolerances; and

    ,iv) assigning a performance index to each of the selected plurality of asset allocations based on at least said determining step (iii); and

    ,(d) indicate to the user that the asset allocation with the best performance index from among the plurality of selected asset allocations is the substantially optimal asset allocation.

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