Financial advisory system
First Claim
1. A computer-implemented method comprising:
- identifying, by a financial product exposure module being executed by one or more processors of one or more computer systems, a relationship between returns of each financial product of a set of financial products that are available to a particular investor for investment and returns of combinations of one or more factor asset classes of a set of factor asset classes by performing an exposure analysis on each financial product of the set of financial products;
determining, by one or more of a simulation processing module and a portfolio optimization module being executed by the one or more processors, expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and
identifying, by the portfolio optimization module, a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor.
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Abstract
A financial advisory system is provided. According to one aspect of the present invention, return scenarios for optimized portfolio allocations are simulated interactively to facilitate financial product selection. Return scenarios for each asset class of a plurality of asset classes are generated based upon estimated future scenarios of one or more economic factors. A mapping from each financial product of an available set of financial products onto one or more asset classes of the plurality of asset classes is created by determining exposures of the available set of financial products to each asset class of the plurality of asset classes. In this way, the expected returns and correlations of a plurality of financial products are generated and used to produce optimized portfolios of financial products. Return scenarios are simulated for one or more portfolios including combinations of financial products from the available set of financial products based upon the mapping.
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Citations
23 Claims
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1. A computer-implemented method comprising:
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identifying, by a financial product exposure module being executed by one or more processors of one or more computer systems, a relationship between returns of each financial product of a set of financial products that are available to a particular investor for investment and returns of combinations of one or more factor asset classes of a set of factor asset classes by performing an exposure analysis on each financial product of the set of financial products; determining, by one or more of a simulation processing module and a portfolio optimization module being executed by the one or more processors, expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and identifying, by the portfolio optimization module, a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9)
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10. A non-transitory computer-readable storage medium containing a set of instructions capable of causing one or more processors to:
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identify a relationship between returns of each financial product of a set of financial products that are available to a particular investor for investment and returns of combinations of one or more factor asset classes of a set of factor asset classes by performing an exposure analysis on each financial product of the set of financial products; determine expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and identify a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor.
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11. A computer-implemented method comprising:
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a step, performed by a financial product exposure module being executed by one or more processors of one or more computer systems, for identifying a relationship between returns of each financial product of a set of financial products that are available to a particular investor for investment and returns of combinations of one or more factor asset classes of a set of factor asset classes; a step, performed by one or more of a simulation processing module and a portfolio optimization module being executed by the one or more processors, for determining expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and a step, performed by the portfolio optimization module, for identifying a recommended portfolio of the plurality of efficient portfolios. - View Dependent Claims (12)
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13. A computer-implemented method comprising:
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forecasting, by a pricing module being executed by one or more processors of one or more computer systems, returns associated with each core asset class of a set of core asset classes by generating core asset class scenarios based upon future scenarios of one or more economic factors with an equilibrium econometric model; forecasting, by a factor module being executed by the one or more processors, returns associated with each factor asset class of a set of factor asset classes by generating factor model asset scenarios based upon the core asset class scenarios; identifying, by a financial product exposure module being executed by the one or more processors, a relationship between future returns of each financial product of a set of financial products that are available to a particular investor for investment and future returns of combinations of one or more factor asset classes of the set of factor asset classes by determining each financial product'"'"'s effective asset mix with respect to the set of factor asset classes; determining, by one or more of a simulation processing module and a portfolio optimization module being executed by the one or more processors, expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and identifying, by the portfolio optimization module, a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor.
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14. A non-transitory computer-readable storage medium containing a set of instructions capable of causing one or more processors to:
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forecast returns associated with each core asset class of a set of core asset classes by generating core asset class scenarios based upon future scenarios of one or more economic factors with an equilibrium econometric model; forecast returns associated with each factor asset class of a set of factor asset classes by generating factor model asset scenarios based upon the core asset class scenarios; identify a relationship between future returns of each financial product of a set of financial products that are available to a particular investor for investment and future returns of combinations of one or more factor asset classes of the set of factor asset classes by determining each financial product'"'"'s effective asset mix with respect to the set of factor asset classes; determine expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and identify a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor.
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15. A computer system comprising:
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a storage device having stored therein one or more routines operable to perform a method for providing portfolio optimization advice to investors; and one or more processors coupled to the storage device and operable to execute the one or more routines, wherein the method comprises; identifying a relationship between returns of each financial product of a set of financial products that are available to a particular investor for investment and returns of combinations of one or more factor asset classes of a set of factor asset classes by performing an exposure analysis on each financial product of the set of financial products; determining expected returns and volatility of returns for each of a plurality of efficient portfolios based upon the relationship, each of the plurality of efficient portfolios including a combination of one or more of the financial products from the set of financial products; and identifying a recommended portfolio of the plurality of efficient portfolios by selecting an efficient portfolio of the plurality of efficient portfolios that maximizes an expected utility of wealth for the particular investor based on a mean-variance utility function associated with the particular investor. - View Dependent Claims (16, 17, 18, 19, 20, 21, 22, 23)
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Specification