Managing security holdings risk during portfolio trading
View Patent ↗The present invention provides methods and systems for managing short-term risk to a portfolio of securities holdings while executing an outstanding trade list. The methods and systems may include steps of determining covariances between securities in the outstanding trade list and securities in the portfolio of holdings; receiving a risk variable, at least one constraint on the execution of a trade, and a proposed quantity representing a portion of said outstanding trade list desired to be executed at a particular time; and determining an immediately executable trade list based at least in part on the covariances and risk variable. The executable trade list must satisfy all of the trade constraints and also must be substantially equal to or less then the proposed quantity.
1. A method of managing risk to a portfolio of securities holdings while executing an outstanding trade list, comprising the steps of:
determining covariances between securities in the outstanding trade list and securities in the portfolio of holdings;
receiving at least one objective to be achieved by the trade;
receiving at least one constraint for the execution of a trade;
receiving a percentage of value of said outstanding trade list desired to be executed in the current wave of trading; and
determining, by a computer configured to determine immediately executable trade lists, an immediately executable trade list based at least in part on said covariances, said at least one objective, and said at lease one constraint, wherein said executable trade list satisfies said at least one constraint and said percentage of value of said outstanding trade list.
2. The method as recited in claim 1 , further including a step of receiving a request for additional immediately executable trade lists at a user defined interval, said additional immediately executable trade lists being generated and displayed iteratively.
3. The method as recited in claim 1 , further including a step of receiving a request for Variable Progress.
4. The method as recited in claim 1 , wherein said at least one constraint is chosen from a list comprising:
Round Lot Trades, All-or-Nothing Trades, SELL-BUY, Fill Ratio, Maximum Size in Percent of Median Daily Trading Volume, Start and End Bins, and Ace Cost.
5. The method as recited in claim 1 , wherein said at least one objective is chosen from a list comprising:
Total Risk, BUY Tracking Risk Side, SELL Side Tracking Risk, Total Sector Imbalance, BUY Side Sector Imbalance, SELL Side Sector Imbalance, Liquidity, BUY Side Concentration, SELL Side Concentrations, Initial Wedge Size, and Portfolio Holdings Risk.
6. The method as recited in claim 1 , wherein said at least one objective is Portfolio Risk.
7. A system for managing risk to a portfolio of securities holdings while executing an outstanding trade list, comprising:
means for determining covariances between securities in the outstanding trade list and securities in the portfolio of holdings;
means for receiving at least one objective to be achieved by the trade;
means for receiving at least one constraint for the execution of a trade;
means for receiving a percentage of value of said outstanding trade list desired to be executed in the current wave of trading; and
means for determining an immediately executable trade list based at least in part on said covariances, said at least one objective, and said at lease one constraint, wherein said executable trade list satisfies said at least one constraint and said percentage of value of said outstanding trade list.
8. The system as recited in claim 7 , further including means for receiving a request for additional immediately executable trade lists at a user defined interval, said additional immediately executable trade lists being generated and displayed iteratively.
9. The system as recited in claim 7 , further including means for receiving a request for Variable Progress.
10. The system as recited in claim 7 , wherein said at least one constraint is chosen from a list comprising:
Round Lot Trades, All-or-Nothing Trades, SELL-BUY Imbalance, Fill Ratio, Maximum Size in Percent of Median Daily Trading Volume, Start and End Bins, and Ace Cost.
11. The system as recited in claim 7 , wherein said at least one objective is chosen from a list comprising:
Total Risk, BUY Tracking Risk Side, SELL Side Tracking Risk, Total Sector Imbalance, BUY Side Sector Imbalance, SELL Side Sector Imbalance, Liquidity, BUY Side Concentration, SELL Side Concentrations, Initial Wedge Size, and Portfolio Holdings Risk.
12. The system as recited in claim 7 , wherein said at least one objective is Portfolio Risk.
13. A system for managing risk to a portfolio of securities holdings while executing an outstanding trade list, comprising:
a computer configured to determine covariances between securities in the outstanding trade list and securities in the portfolio of holdings, receive at least one objective to be achieved by the trade, store said received at least one objective in computer-readable memory, receive at least one constraint for the execution of a trade, store said received at least one constraint in computer-readable memory, receive a percentage of value of said outstanding trade list desired to be executed in the current wave of trading, store said received percentage of value of said outstanding trade list in computer-readable memory, and determine an immediately executable trade list based at least in part on said covariances, said stored at least one objective, and said stored at lease one constraint, wherein said executable trade list satisfies said stored at least one constraint and said stored percentage of value of said outstanding trade list.
14. The system as recited in claim 13 , wherein said computer is two or more computers connected via an electronic communications network.