Method and Computer Program for Minimizing Trading Costs Subject to a Probability Criterion of Optimality Acceptability

摘要

Embodiments model a series of partial trades on an investment portfolio to reduce the optimality discrepancy relative to a target optimal portfolio, and determine whether a partially rebalanced portfolio along the trading path is within a predefined threshold of statistical optimality relative to the target optimal portfolio. Certain embodiments maximize the impact of partial rebalancing of a portfolio by maximizing reduction of an optimality discrepancy while minimizing the trade cost function along the trading path from the initial portfolio toward the target optimal portfolio.

主权项

1. A computer modeling system for modeling one or more partial trades to rebalance an investment portfolio, the computer modeling system comprising:
a memory having stored thereon computer-executable instructions for modeling one or more partial trades to rebalance an initial investment portfolio; a processor operatively coupled to the memory and configured to:
programmatically receive, as a first input, a Michaud resampled efficient frontier of portfolios, the resampled efficient frontier programmatically generated based on input data corresponding to returns of a plurality of asset classes, programmatically receive, as a second input, a first target optimal portfolio on the resampled efficient frontier of portfolios,
programmatically read the computer-executable instructions from the memory to model a first partial trade based on the initial portfolio toward the first target optimal portfolio to generate a first partially rebalanced portfolio, the first partial trade modeled to reduce a first optimality discrepancy associated with the initial portfolio relative to the first target optimal portfolio,determine a first rebalance probability associated with the first partially rebalanced portfolio, anddetermine that the first partially rebalanced portfolio is statistically optimal if the first rebalance probability satisfies a predefined rebalance probability criterion; and a visual display device configured to display an indication that the first partially rebalanced portfolio is statistically optimal.