Computer implemented risk managed trend indices

Abstract

The present invention provides for computer based systems and program controlled methods for reducing investors' exposure to the variability of an asset class's short-term volatility using rules-based long-only investments in various asset classes in which portfolio weights are dynamically rebalanced on a regular basis to a desired target volatility. This is achieved by constructing an index that represents a portfolio of liquid futures contracts, rebalanced as often as daily with the objective of maintaining the portfolio's volatility at a given level, typically the long-term average risk of that asset class. The index therefore is expected to exhibit relatively stable risk at all times when compared to the asset class's risk levels including during periods of high market volatility.

What is claimed is: 
     
         1 . A computer system comprising:
 a data tracking module for receiving select trade and price data associated with plural future contracts and organizing said trade and price data into compiled attenuated risk portfolio;   an index determination processor for selectively assessing a measure of said risk attenuated portfolio; and   a report generator for developing an output presentation of said index based on a portfolio of investments characterized by a select volatility and said portfolio is dynamically rebalanced on a periodic basis by the purchase and/or sale of futures contracts.   
     
     
         2 . A computer implemented method for maintaining the short term risk of asset classes, within an investment portfolio, at or near the long term volatility level of said asset classes, comprising:
 identifying eligible future contracts based on a minimum average daily dollar trading volume and regulatory restrictions;   calculating the volatility target level for each asset class using the average volatility for traditional long-only indexes representing each asset class for a predefined trailing period, wherein said asset classes include equity, interest rate, currency, and commodity;   stabilizing the volatility of each asset class at said target level by modulating the market exposure of each asset class;   rescaling the risk allocation among asset classes; and   combining said rescaled asset classes into a composite index.   
     
     
         3 . The computer implemented method of  claim 2 , wherein said predefined trailing period is 10-years. 
     
     
         4 . The computer implemented method of  claim 2 , wherein said modulation of market exposure of each asset class is inversely proportional to the short term volatility for that asset class. 
     
     
         5 . The computer implemented method of  claim 2 , further comprising the step of allocating risk among constituent assets within an asset class. 
     
     
         6 . The computer implemented method of  claim 5 , wherein said risk is allocated equally among constituent assets within said asset class. 
     
     
         7 . The computer implemented method of  claim 2 , further comprising the step of determining trading costs.