Method and apparatus for creating and managing a visual representation of a portfolio and determining an efficient allocation

• US 20030088492A1
• Filed: 08/16/2002
• Published: 05/08/2003
• Est. Priority Date: 08/16/2001
• Status: Active Grant

• Current Assignee: James Eric Damschroder
• Original Assignee: James Eric Damschroder
• Inventors: Damschroder, James Eric
• Granted Patent: US 7,472,084 B2
• Time in Patent Office: Days
• US Class Current: 705/36
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

The invention provides a method and device for creating a holistic representation of a portfolio. The model graphs diversification and explains diversification as symmetry. The model can facilitate active management of a portfolio, communication of complicated investment concepts and lucid, holistic portfolio representation. The model, normally depicted in three dimensions may provide a platform to perform portfolio analysis and manage investments. The invention embodies custom efficient portfolio creation, and diversification quantification via the intra-portfolio correlation. Portfolio creation gives the user freedom to select user-defined variables that are modeled as axes. Assets are graphed on the basis of their relationship or correlation with all the other assets in the determined asset universe. More attractive assets are graphed furthest from the origin. Thus the efficient allocation is determined using volume attribution for the assets comprising the surface of the model. Users seek to create large, symmetrical volumes that exhibit maximum diversification.

Claims

1. A graphical simulator comprising a computerized processor wherein said computerized processor is configured to:

a. accept an asset universe wherein said asset universe comprises at least two assets;

b. construct a relationship matrix for said asset universe wherein said relationship matrix depicts a quantification of a relationship between each of said at least two assets from said asset universe relative to each of said other assets from said asset universe;

c. determine a vector or coordinate for each of said at least two assets based on said relationship matrix;

d. rescale each said vector or coordinate to match said vector or coordinate to a set of selected variables;

e. plot each of said resealed vectors or coordinates to create a model of said asset universe; and

f. construct a hull for said model.

2. A graphical simulator comprising a computerized processor wherein said computerized processor is configured to:

a. accept an asset universe wherein said asset universe comprises at least two assets;

b. construct a relationship matrix for said asset universe wherein said relationship matrix depicts a correlation computed from a correlation formula wherein said correlation formula measures the performance of each of said at least two assets from said asset universe relative to each of said other assets from said asset universe; and

c. compute a vector component for each of said at least two assets in said asset universe for depiction in a base model wherein said vector component represents a relationship derived from said relationship matrix for each of said at least two assets in relation to each other;

3. A graphical simulator as claimed in claim 2 wherein said base model comprises a set of axes wherein said axes represent attributes associated with a set of objectives for said asset universe.

4. A graphical simulator as claimed in claim 3 wherein said computerized processor calculates said vector components for said asset universe so that

a. a set of assets in said asset universe with a positive correlation value appear closer to each other in said base model;

and

b. a set of assets in said asset universe with a negative correlation value appear in opposition to each other in said base model.

5. A graphical simulator as claimed in claim 4 wherein said vector component may be scaled according to a set of predetermined criteria.

6. A graphical simulator as claimed in claim 5 wherein said computer processor generates a surface comprising a set of data points representing a set of assets appearing on said base model'"'"'s exterior.

7. A graphical simulator as claimed in claim 6 wherein said graphical simulator further comprises a computerized display device in communication with said computer processor and wherein said computer processor creates a second model associated with a second asset universe and communicates said second model to said computerized display device to be simultaneously displayed on said computerized display device with said base model.

8. A graphical simulator as claimed in claim 7 wherein said second asset universe comprises an historical asset universe.

9. A graphical simulator as claimed in claim 6 wherein said graphical simulator further comprises a computerized display device in communication with said computer processor and wherein said computer processor creates a second model associated with a second asset universe and communicates said second model to said computerized display device to be successively displayed on said computerized display device.

10. A graphical simulator as claimed in claim 6 wherein said graphical simulator further comprises a computerized display device in communication with said computer processor and wherein said computer processor creates a second model associated with a second asset universe and communicates said second model to said computerized display device to overlay a display associated with said base model with a display of said second model.

11. A graphical simulator comprising a computerized processor and a display device in communication with said computerized processor wherein said computerized processor is configured to:

a. accept an asset universe wherein said asset universe comprises at least two assets;

b. construct a relationship matrix for said asset universe wherein said relationship matrix depicts a correlation computed from a correlation formula wherein said correlation formula measures the performance of each of said at least two assets from said asset universe relative to each of said other assets from said asset universe;

c. compute a set of vector components between each of said at least two assets in said asset universe wherein said vector components are derived from said relationship matrix for each of said at least two assets in relation to each other;

d. adjust said vector components to conform to a set of predefined constraints;

e. communicate said vector components associated with each of said at least two assets to said display device to display a model of said asset universe.

12. A graphical simulator as claimed in claim 11 wherein said processor is capable of adjusting the view of said model.

13. A graphical simulator as claimed in claim 12 wherein said computerized processor is further configured to generate a surface comprising a set of data points representing a set of assets appearing on said model'"'"'s exterior and to determine a volume associated with said model.

14. A graphical simulator as claimed in claim 13 wherein said computerized processor is further configured to color-code said generated surface.

15. A graphical simulator as claimed in claim 14 wherein said computerized processor is configured to permit selection of any given asset in said model and to create a model displaying a set of correlative values for a set of attributes associated with said given asset.

16. A graphical simulator as claimed in claim 15 wherein said computerized processor is further configured to accept additional data regarding said asset universe and create an animated series of models illustrating a set of differences between a first model and a set of additional models.

17. A graphical simulator as claimed in claim 11 wherein said model is displayed in a substantially three-dimensional space.

18. A graphical simulator comprising a computerized processor and a display device in communication with said computerized processor wherein said computerized processor is configured to:

a. accept a resource universe wherein said resource universe comprises at least two resources;

b. construct a relationship matrix for said resource universe wherein said relationship matrix depicts a correlation computed from a correlation formula wherein said correlation formula measures the correlation between each of said at least two assets from said resource universe relative to each of said other resources from said resource universe;

c. compute a set of vector components between each of said at least two resources in said resource universe wherein said vector components are derived from said relationship matrix for each of said at least two resources in relation to each other;

d. adjust said vector components to conform to a set of predefined constraints;

e. communicate said vector components associated with each of said at least two resources to said display device to display a model of said resource universe.

19. A method of selecting a set of assets comprising an efficient set comprising the steps of

a. selecting an asset universe wherein said asset universe comprises at least two assets;

b. constructing a relationship matrix for said asset universe wherein said relationship matrix depicts a relationship quantification between each of said at least two assets from said asset universe relative to each of said other assets from said asset universe;

c. solving a system of equations to determine a vector or coordinate for each of said at least two assets based on said relationship matrix;

d. scaling said vector or coordinate for each of said at least two assets against a set of selected variables;

e. plotting said vector or coordinate to create a model representing said asset universe;

f. determining an exterior for the model;

g. determining an efficient set by selecting a set of assets wherein each asset in said set of assets comprises a set of coordinates which are located on the substantial exterior of the model.

20. A method of determining an efficient allocation for a set of assets comprising the steps of:

a. selecting an asset universe wherein said asset universe comprises at least two assets;

b. constructing a relationship matrix for said asset universe wherein said relationship matrix depicts a relationship quantification between each of said at least two assets from said asset universe relative to each of said other assets from said asset universe;

c. determine a vector or coordinate for each of said at least two assets based on said relationship matrix;

d. scaling each said vector or coordinate for each of said at least two assets according to a set of predefined criteria;

e. creating a model from said vector or coordinate for each of said at least two assets;

f. determining an exterior surface for said model;

g. determining a set of assets associated with a set of coordinates which are substantially located on said exterior surface of said model;

h. re-allocating a set of resources associated with each of said at least two assets to produce said efficient allocation.