Enhancing utility and diversifying model risk in a portfolio optimization framework
US6292787A · kind A · utility
Assignee
Inventors
Key dates
| Filing date | Sep 11, 1998 |
| Grant date | Sep 18, 2001 |
| Priority date | — |
| Expiry date | Sep 11, 2018 |
Classification
- Technology area (CPC G)Physics
- CPC primaryG06Q40/06
- WIPO fieldIT methods for management
- WIPO sectorElectrical engineering
Abstract
A portfolio optimization process that diversifies model risk by favoring a more diversified portfolio over other portfolios with similar characteristics is provided. According to one aspect of the present invention, a more diverse portfolio may be selected over an initial portfolio in order to diversify model risk with reference to a predetermined diversity budget, defined in terms of expected return, risk, and/or utility. An initial portfolio of financial products is determined from an available set of financial products. One or more dimensions of an error space are searched for an alternate portfolio that is more diverse than the initial portfolio. A cost associated with the alternate portfolio is then calculated by comparing the difference between a characteristic of the initial portfolio and a corresponding characteristic of the alternate portfolio. Finally, the alternate portfolio is selected as the recommended portfolio if the cost is less than or equal to the predetermined diversity budget. According to another aspect of the present invention an intelligent search is performed for a diverse portfolio that meets a predetermined diversity budget. An initial portfolio is determ…
Source: USPTO / EPO open patent data. Objective bibliographic and citation counts.