Minimizing security holdings risk during portfolio trading

Abstract

A method and computer program product for minimizing short-term risk to a portfolio of securities holdings during implementation of executing an outstanding trade list of securities to be traded, takes into account covariances between securities in the outstanding trade list and between securities in the outstanding trade list and securities in the portfolio of holdings so as to minimize risk to the portfolio of holdings as well as to a residual trade list of unexecuted orders during said implementation.

1 . A method of minimizing short-term risk to a portfolio of securities holdings during implementation of executing an outstanding trade list of securities to be traded, comprising the steps of:
 determining covariances between securities in the outstanding trade list and between securities in the outstanding trade list and securities in the portfolio of holdings;   receiving a quantity representing a portion of said trade list desired to be executed at a particular time;   determining a residual trade list of securities not to be traded at said particular time based on said covariances and said received quantity, which results in a minimum risk to said residual trade list and to said portfolio of securities holdings; and   determining an execution trade list including identities and quantities of securities to be traded at said particular time by subtracting said residual trade list from said outstanding trade list.   
     
     
         2 . The method of  claim 1 , wherein the step of determining said residual trade list takes into account a short-term return associated with said portfolio of holdings. 
     
     
         3 . The method of  claim 1 , wherein the step of determining said residual trade list takes into account a short-term return associated with said execution trade list. 
     
     
         4 . The method of  claim 1 , wherein the step of determining said residual trade list takes into account a short-term risk associated with said portfolio of holdings. 
     
     
         5 . The method of  claim 1 , wherein the step of determining said residual trade list takes into account a short-term risk associated with said execution trade list. 
     
     
         6 . A method of minimizing short-term risk to a portfolio of securities holdings during implementation of executing an outstanding trade list of securities to be traded, comprising the steps of:
 determining covariances between securities in the outstanding trade list and between securities in the outstanding trade list and securities in the portfolio of holdings;   receiving a quantity representing a portion of said trade list desired to be executed at a particular time;   determining an execution trade list of securities to be traded at said particular time based on said covariances and said received quantity, which results in a maximum return to said execution trade list and to said portfolio of securities holdings; and   determining a residual trade list including identities and quantities of securities not to be traded at said particular time by subtracting said execution trade list from said outstanding trade list.   
     
     
         7 . The method of  claim 6 , wherein the step of determining said execution trade list takes into account a short-term return associated with said portfolio of holdings. 
     
     
         8 . The method of  claim 6 , wherein the step of determining said execution trade list takes into account a short-term return associated with said execution trade list. 
     
     
         9 . The method of  claim 6 , wherein the step of determining said execution trade list takes into account a short-term risk associated with said portfolio of holdings. 
     
     
         10 . The method of  claim 6 , wherein the step of determining said execution trade list takes into account a short-term risk associated with said execution trade list. 
     
     
         11 . A computer program product for minimizing short-term risk to a portfolio of securities holdings during implementation of executing an outstanding trade list of securities to be traded, comprising the following computer-executable instructions stored on a computer-readable storage medium:
 a computer program module for determining covariances between securities in the outstanding trade list and between securities in the outstanding trade list and securities in the portfolio of holdings;   a computer program module for receiving a quantity representing a portion of said trade list desired to be executed at a particular time;   a computer program module for determining a residual trade list of securities not to be traded at said particular time based on said covariances and said received quantity, which results in a minimum risk to said residual trade list and to said portfolio of securities holdings; and   a computer program module for determining an execution trade list including identities and quantities of securities to be traded at said particular time by subtracting said residual trade list from said outstanding trade list.   
     
     
         12 . The computer program product of  claim 11 , wherein the program module for determining said residual trade list takes into account a short-term return associated with said portfolio of holdings. 
     
     
         13 . The computer program product of  claim 11 , wherein the program module for determining said residual trade list takes into account a short-term return associated with said execution trade list. 
     
     
         14 . The computer program product of  claim 11 , wherein the program module for determining said residual trade list takes into account a short-term risk associated with said portfolio of holdings. 
     
     
         15 . The computer program product of  claim 11 , wherein the program module for determining said residual trade list takes into account a short-term risk associated with said execution trade list. 
     
     
         16 . A computer program product for minimizing short-term risk to a portfolio of securities holdings during implementation of executing an outstanding trade list of securities to be traded, comprising the following computer-executable instructions stored on a computer-readable storage medium:
 a computer program module for determining covariances between securities in the outstanding trade list and between securities in the outstanding trade list and securities in the portfolio of holdings;   a computer program module for receiving a quantity representing a portion of said trade list desired to be executed at a particular time;   a computer program module for determining an execution trade list of securities to be traded at said particular time based on said covariances and said received quantity, which results in a maximum return to said execution trade list and to said portfolio of securities holdings; and   a computer program module for determining a residual trade list including identities and quantities of securities not to be traded at said particular time by subtracting said execution trade list from said outstanding trade list.   
     
     
         17 . The computer program product of  claim 16 , wherein the program module for determining said residual trade list takes into account a short-term return associated with said portfolio of holdings. 
     
     
         18 . The computer program product of  claim 16 , wherein the program module for determining said residual trade list takes into account a short-term return associated with said execution trade list. 
     
     
         19 . The computer program product of  claim 16 , wherein the program module for determining said residual trade list takes into account a short-term risk associated with said portfolio of holdings. 
     
     
         20 . The computer program product of  claim 16 , wherein the program module for determining said residual trade list takes into account a short-term risk associated with said execution trade list.