Apparatus and accompanying methods for automatically modifying a financial portfolio through dynamic re-weighting based on a non-constant function of current capitalization weights
First Claim
1. Apparatus for managing a portfolio having a set of financial securities, wherein said set comprises a plurality of said securities contained as members within a predetermined capitalization weighted index, said apparatus comprising:
- circuitry, responsive to signals containing data having current price information on each of said securities and on constituent securities currently contained within said index, for providing digital data containing the price information and containing share information for each of the constituent securities that currently forms the index; and
a computer system, the computer system having a processor and a memory, the memory storing computer executable instructions therein, wherein the processor in response to the executable instructions and to said digital data;
determines a variable weighting for each of the securities in the set so as to define a set of variable weights, distinct from a set of current capitalization weights associated with the index, such that each of the variable weights is a non-constant mathematical function of solely the current capitalization weights; and
issues, in response to the set of variable weights, digital trading instructions which are in turn executed to effectuate securities transactions such that current assets held in the portfolio are to be distributed amongst the securities in the set in proportion to and as defined by the variable weights so as to dynamically rebalance the portfolio, each of said digital trading instructions representing a desired trade in a corresponding one of the securities in the set thereby defining a plurality of trades to be executed.
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Abstract
Apparatus and methods for automatically modifying a financial portfolio having a pre-defined universe of securities, such as, e.g., an index fund, that tracks a given capitalization weighted index, through dynamic re-weighting of a position held in each such security. Specifically, in a computer system (50, 60), a target weight is accorded to each such security, relative to others in the portfolio, in proportion to a non-constant function of current capitalization weights of the securities in the index. Once these target weights are determined, then, in response to both the target weight of each such security and an actual weight, as a proportion of the portfolio, in which that security is currently held, a trade will be generated by the system in order to conform, within a predefined band, the actual weight to the target weight so as to rebalance the holdings in the portfolio. The system can selectively operate in either one of two modes: a dynamic rebalancing mode for calculating new target weights and issuing appropriate trades, or a cash investment mode for issuing one or more trade(s) to consume excess cash then held in the portfolio.
671 Citations
72 Claims
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1. Apparatus for managing a portfolio having a set of financial securities, wherein said set comprises a plurality of said securities contained as members within a predetermined capitalization weighted index, said apparatus comprising:
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circuitry, responsive to signals containing data having current price information on each of said securities and on constituent securities currently contained within said index, for providing digital data containing the price information and containing share information for each of the constituent securities that currently forms the index; and a computer system, the computer system having a processor and a memory, the memory storing computer executable instructions therein, wherein the processor in response to the executable instructions and to said digital data; determines a variable weighting for each of the securities in the set so as to define a set of variable weights, distinct from a set of current capitalization weights associated with the index, such that each of the variable weights is a non-constant mathematical function of solely the current capitalization weights; and issues, in response to the set of variable weights, digital trading instructions which are in turn executed to effectuate securities transactions such that current assets held in the portfolio are to be distributed amongst the securities in the set in proportion to and as defined by the variable weights so as to dynamically rebalance the portfolio, each of said digital trading instructions representing a desired trade in a corresponding one of the securities in the set thereby defining a plurality of trades to be executed. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40)
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41. A method for managing a portfolio having a set of financial securities, wherein said set comprises a plurality of said securities contained as members within a predetermined capitalization weighted index, said method comprising the steps of:
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providing, in response to signals containing data having current price information on each of said securities and on constituent securities currently contained within said index, digital data containing the price information and containing share information for each of the constituent securities that currently forms the index; and in a computer system having a processor and a memory, the memory storing computer executable instructions therein, wherein the method further comprises the steps, in response to the stored instructions and the digital data, of, in the processor; determining a variable weighting for each of the securities in the set so as to define a set of variable weights, distinct from a set of current capitalization weights associated with the index, such that each of the variable weights is a non-constant mathematical function of solely the current capitalization weights issuing, in response to the set of variable weights, digital trading instructions such that current assets held in the portfolio are to be distributed amongst the securities in the set in proportion to and as defined by the variable weights so as to dynamically rebalance the portfolio, each of said digital trading instructions representing a desired trade in a corresponding one of the securities in the set thereby defining a plurality of trades to be executed; and executing each of said digital trading instructions so as to effectuate the trades. - View Dependent Claims (42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72)
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Specification