Apparatus, method and system for designing and trading macroeconomic investment views

• US 7,949,590 B2
• Filed: 04/15/2005
• Issued: 05/24/2011
• Est. Priority Date: 04/16/2004
• Status: Active Grant

• Current Assignee: Goldman Sachs & Co. LLC (Goldman Sachs Group Incorporated)
• Original Assignee: Goldman Sachs & Company (Goldman Sachs Group Incorporated)
• Inventors: Strongin, II, Steven Harris
• Primary Examiner(s): Patel, Jagdish N
• Assistant Examiner(s): POE, KEVIN T
• Application Number:
  US11/107,005
• Publication Number:
  US 20060004653A1
• Time in Patent Office: 2,230 Days
• Field of Search: 705 36- 37, 705/36.R
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 30/0202 Market predictions or forecasting for commercial activities
• 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

The disclosure details the implementation of an apparatus, method, and system for a macroeconomic equity investment design and trade system (the Wavefront system). The disclosure teaches a set of quantitative tools to help investors design trades around macro themes. Part of the approach is a linked set of models called Wavefronts, which describe how economic shocks ripple through the economy into company performance, market value and equity returns in the US market. In one embodiment, the modeling may be viewed as having in three parts. The first converts an economic shock into a comprehensive set of shifts in the economy. The second takes those economic shifts and drives them into company fundamentals. The third values those fundamentals based on what the market normally pays. As a consequence, the Wavefront system maps economic views and risks into predictions of what the market will pay for those changes, and the industries and companies that will over-and under-perform, which allows for and results in the construction of more risk-efficient portfolios. In an alternative embodiment, the Wavefront system may also inverse the progression of the three parts to uncover and move industry specific information to uncover macroeconomic themes.

Claims

1. A computer-implemented method for designing securities transactions, comprising:

receiving securities portfolio data on a computer system;

receiving macro-economic event data, wherein the macro-economic event data includes data associated with a plurality of macro-economic variables;

analyzing the received securities portfolio data and the macro-economic event data to determine a plurality of risks and exposures to economic and market factors using said computer system, wherein said analysis includes;

generating by the computer system economic wavefront data based on the received macro-economic event data, wherein the economic wavefront data describes total incremental impact of the macro-economic event on the plurality of macro-economic variables;

generating by the computer system industry wavefront data based on the economic wavefront data, wherein the industry wavefront data describes relative response of industry sales to the economic wavefront data;

generating by the computer system fundamental wavefront data based on the industry wavefront data, wherein the fundamental wavefront data describes impact of the industry wavefront data at company level on microeconomic variables; and

generating by the computer system valuation wavefront data based on the fundamental wavefront data, wherein the valuation wavefront data describes the impact of the fundamental wavefront data on relative value of the securities portfolio;

reconfiguring by the computer system said securities portfolio based on the valuation wavefront data resulting from the analysis to manage the plurality of risks and exposures to the economic and market factors.

2. The method of claim 1, further comprising determining the total incremental impact of the macro-economic event on the plurality of macro-economic variables by:

determining a time interval that the macro-economic event affects the plurality of macro-economic variables;

obtaining macro-economic variable values for the determined time interval; and

calculating the total incremental impact for the plurality of macro-economic variables for the determined time interval based on the obtained macro-economic variable values.

3. The method of claim 1, further comprising determining the relative response of industry sales to the economic wavefront data by correlating the plurality of macro-economic variables with the industry sales response.

4. The method of claim 3 further comprising:

identifying most predictive macro-economic variables from the plurality of macro-economic variables based on the correlation;

deriving company margin from the identified most predictive macro-economic variables; and

determining valuation of the company based on the derived company margin.

5. The method of claim 4, wherein the valuation is based on market-based valuation.

6. A computer-implemented method for designing securities transactions, comprising:

receiving on a computer system securities portfolio data;

receiving on said computer system economic wavefront data, wherein said economic wavefront data includes data associated with a macro-economic event and anticipated impact of the macro-economic event on a plurality of macro-economic variables;

receiving valuation wavefront data on said computer system, wherein said valuation wavefront data includes data associated with an anticipated impact of the economic wavefront data on industry performance and company fundamentals; and

analyzing by the computer system the received securities portfolio data, the economic wavefront data and the valuation wavefront data to determine a plurality of risks and exposures to economic and market factors using said computer system; and

reconfiguring said securities portfolio based on said analysis using said computer system to manage the plurality of risks and exposures to the economic and market factors.

7. The method of claim 6 wherein said analysis comprises:

developing a wavefront model linking the economic and valuation wavefront data using said computer system to determine impact of the macro-economic event on valuation of the securities portfolio.

8. The method of claim 6 further comprising:

aggregating company-level impact results on an industry level using said computer system to develop macro-economic positions that are diversified away from a specific company risk and focused on desired macro-economic exposures.

9. A system for designing securities transactions, comprising:

a memory;

a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, wherein the processor issues instructions to;

receive securities portfolio data;

receive macro-economic event data, wherein the macro-economic event data includes data associated with a plurality of macro-economic variables;

analyze the received securities portfolio data and the macro-economic event data to determine a plurality of risks and exposures to economic and market factors, wherein said analysis includes instructions to;

generate economic wavefront data based on the received the received macro-economic event data, wherein the economic wavefront data describes total incremental impact of the macro-economic event on the plurality of macro-economic variables;

generate industry wavefront data based on the economic wavefront data, wherein the industry wavefront data describes relative response of industry sales to the economic wavefront data;

generate fundamental wavefront data based on the industry wavefront data, wherein the fundamental wavefront data describes impact of the industry wavefront data at company level on microeconomic variables; and

generate valuation wavefront data based on the fundamental wavefront data, wherein the valuation wavefront data describes the impact of the fundamental wavefront data on relative value of the securities portfolio;

reconfigure said securities portfolio based on the valuation wavefront data resulting from the analysis to manage the plurality of risks and exposures to the economic and market factors.

10. A system for designing securities transactions, comprising:

a memory;

a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, wherein the processor issues instructions to;

receive securities portfolio data;

receive economic wavefront data, wherein the economic wavefront data includes data associated with a macro-economic event and anticipated impact of the macro-economic event on a plurality of macro-economic variables;

receive valuation wavefront data, wherein said valuation wavefront data includes data related to anticipated impact of the economic wavefront data on industry performance and company fundamentals;

analyze the received securities portfolio data, the economic wavefront data and the valuation wavefront data to determine a plurality of risks and exposures to economic and market factors; and

reconfigure said securities portfolio based on said analysis to manage the plurality of risks and exposures to the economic and market factors.

11. A non-transitory medium readable by a processor to design securities transactions, comprising:

processor-executable program instructions residing thereon, wherein the processor-executable program instructions are executable by the processor to;

receive securities portfolio data;

receive macro-economic event data, wherein the macro-economic event data includes data associated with a plurality of macro-economic variables;

analyze the received securities portfolio data and the macro-economic event data to determine a plurality of risks and exposures to economic and market factors, wherein said analysis includes instructions to;

generate economic wavefront data based on the received the received macro-economic event data, wherein the economic wavefront data describes total incremental impact of the macro-economic event on the-plurality of macro-economic variables;

generate industry wavefront data based on the economic wavefront data, wherein the industry wavefront data describes relative response of industry sales to the economic wavefront data;

generate fundamental wavefront data based on the industry wavefront data, wherein the fundamental wavefront data describes impact of the industry wavefront data at company level on microeconomic variables; and

generate valuation wavefront data based on the fundamental wavefront data, wherein the valuation wavefront data describes the impact of the fundamental wavefront data on relative value of the securities portfolio;

reconfigure said securities portfolio based on the valuation wavefront data resulting from the analysis to manage the plurality of risks and exposures to the economic and market factors.

12. A non-transitory medium readable by a processor to design securities transactions, comprising:

processor-executable program instructions residing thereon, wherein the processor-executable program instructions are executable by the processor to;

receive securities portfolio data;

receive economic wavefront data, wherein said economic wavefront data includes data associated with a macro-economic event and anticipated impact of the macro-economic event on a plurality of macro-economic variables;

receive valuation wavefront data on said computer system, wherein said valuation wavefront data includes data associated with an anticipated impact of the economic wavefront data on industry performance and company fundamentals;

analyze the received securities portfolio data, the economic wavefront data and the valuation wavefront data to determine a plurality of risks and exposures to economic and market factors using said computer system; and

reconfigure said securities portfolio based on said analysis using said computer system to manage the plurality of risks and exposures to the economic and market factors.

13. An apparatus to design securities transactions, comprising:

a memory;

a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, wherein the instructions issue signals to;

receive securities portfolio data;

receive macro-economic event data, wherein the macro-economic event data includes data associated with a plurality of macro-economic variables;

analyze the received securities portfolio data and the macro-economic event data to determine a plurality of risks and exposures to economic and market factors, wherein said analysis includes instructions to;

generate economic wavefront data based on the received the received macro-economic event data, wherein the economic wavefront data describes total incremental impact of the macro-economic event on the plurality of macro-economic variables;

generate industry wavefront data based on the economic wavefront data, wherein the industry wavefront data describes relative response of industry sales to the economic wavefront data;

generate fundamental wavefront data based on the industry wavefront data, wherein the fundamental wavefront data describes impact of the industry wavefront data at company level on microeconomic variables; and

generate valuation wavefront data based on the fundamental wavefront data, wherein the valuation wavefront data describes the impact of the fundamental wavefront data on relative value of the securities portfolio;

reconfigure said securities portfolio based on the valuation wavefront data resulting from the analysis to manage the plurality of risks and exposures to the economic and market factors.

14. An apparatus to design securities transactions, comprising:

a memory;

a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, wherein the instructions issue signals to;

receive securities portfolio data;

receive economic wavefront data, wherein the economic wavefront data includes data associated with a macro-economic event and anticipated impact of the macro-economic event on a plurality of macro-economic variables;

receive valuation wavefront data, wherein said valuation wavefront data includes data related to anticipated impact of the economic wavefront data on industry performance and company fundamentals;

analyze the received securities portfolio data, the economic wavefront data and the valuation wavefront data to determine a plurality of risks and exposures to economic and market factors; and

reconfigure said securities portfolio based on said analysis to manage the plurality of risks and exposures to the economic and market factors.