Beta adjustment for leveraged index products

Abstract

A technique to provide a return from an aggregate of an investment in a cash equivalent account and a leveraged index product account over a time period that is substantially equivalent to a multiple of the return of a theoretical position in an underlying index for the period of time is provided by calculating in a computer system a benchmark exposure of the theoretical position in the underlying index corresponding to the index used in the leveraged index fund; and based on the benchmark exposure, determining whether to initiate a transaction to re-allocate funds from the leveraged index product to a cash equivalent account or from the cash equivalent account to the leveraged index product according to the determined daily benchmark exposure.

1 . A computer implemented method comprises:
 periodically calculating in a computer system, a theoretical position in an underlying index corresponding to an index used in a leveraged index product; and based on the theoretical position,   determining the level of investment in a leveraged index product account required to provide substantially the same exposure to the underlying index as the exposure provided by the theoretical position, with the exposure provided by the theoretical position being within a range of 0.5% to 5%;   sending a message indicating the level of investment to a user interface that is displayable on a user device, with the user interface having a field for a user to input a decision on the level of investment; and   receiving a response from the user device indicated the user's decision.   
     
     
         2 . The method of  claim 1 , wherein the user interface is a graphical user interface. 
     
     
         3 . The method of  claim 1 , further comprising:
 receiving from the user device a transaction message indicating a transaction to execute;   executing the transaction to re-allocate funds between the leveraged index product account and the cash equivalent account.   
     
     
         4 . The method of  claim 1  wherein a return provided from the aggregate of investment in the cash equivalent account and the leveraged index product account over a time period is substantially equivalent to a multiple of the return of the theoretical position in the index over the period of time. 
     
     
         5 . The method of  claim 1  wherein the user interface comprises:
 a field to allow an investor to choose a benchmark. 
 
     
     
         6 . The method of  claim 2  wherein determining whether to initiate a transaction further comprises:
 determining a desired investment in a leveraged index product based on the theoretical position in the underlying index; 
 comparing the desired investment in the leveraged index product to the current value of funds in the leveraged index product account to provide a difference; and if the current value of funds in the leveraged index product exceeds the desired value by more than a specified tolerance, sending the message to recommend a transfer of funds from the leveraged index product account to the cash equivalent account. 
 
     
     
         7 . (canceled) 
     
     
         8 . The method of  claim 2  wherein determining whether to initiate a transaction further comprises:
 determining a desired investment in a leveraged index product based on the theoretical position in the underlying index; 
 comparing the desired investment in a leveraged index product to the current value of funds in the leveraged index product account to provide a difference; and if the desired value of funds in the leveraged index product exceeds the current value by more than a specified tolerance, 
 sending the message to recommend a transfer of funds from the cash equivalent account to the leveraged index product account. 
 
     
     
         9 . (canceled) 
     
     
         10 . (canceled) 
     
     
         11 . The method of  claim 1  wherein, the theoretical position in the underlying index is a Theoretical Benchmark Exposure (TBE), which at any time is determined according to:
   (TBE)= K*P *(1 +X )*(( K− 1)*( P )*( r )*( ip )). 
 where “P” is an amount of allocated assets; “K” is an leverage multiple of P; 
 where the value of K is less than a beta of the leveraged fund; “X” is the return of the underlying index; “r” is the broker call rate and “ip” is the investment period. 
 
     
     
         12 . The method of  claim 2  wherein the graphical user interface further comprises:
 a field to choose return multiple, a field to specify an initial investment amount, and a field to allow the user to re-balance exposure. 
 
     
     
         13 . (canceled) 
     
     
         14 . A computer program product residing on a non-transitory computer readable medium for rebalancing exposure to an underlying index in a leveraged index product comprises instructions for causing a computer to:
 periodically calculate in a computer system, a theoretical position in an underlying index corresponding to an index used in a leveraged fund; and based on the theoretical position,   determine the level of investment in a leveraged index product account that is required to provide substantially the same exposure to the underlying index as the exposure provided by the theoretical position in the underlying index, with the exposure provided by the theoretical position being within a range of 0.5% to 5%;   send a message indicating the level of investment to a user interface that is displayable on a user device, with the user interface having a field for a user to input a decision on the level of investment and   receive a response from the user device indicated the user's decision.   
     
     
         15 . The computer program product of  claim 14 , further comprising instructions to:
 generate the user interface that is a graphical user interface.   
     
     
         16 . The computer program product of  claim 14 , further comprising instructions to:
 receive from the user device a transaction message indicating a transaction to execute;   execute the transaction to re-allocate funds between the leveraged index product account and cash equivalent account.   
     
     
         17 . (canceled) 
     
     
         18 . The computer program product of  claim 14  wherein instructions to determine whether to initiate a transaction further comprise instructions to:
 determine a desired investment in a leveraged index product based on the theoretical position in the underlying index; 
 compare the desired investment in a leveraged index product to the current value of funds in the leveraged index product account to provide a difference; and if the current value of funds in the leveraged index product account exceeds the desired investment by more than a specified tolerance, 
 send the message to recommend a transfer of funds from the leveraged index product account to the cash equivalent account. 
 
     
     
         19 . (canceled) 
     
     
         20 . The computer program product of  claim 14  wherein instructions to determine whether to initiate a transaction further comprise instructions to:
 determine a desired investment in a leveraged index product based on the theoretical position in the underlying index; 
 compare the desired investment in a leveraged index product to the current value of the funds in the leveraged index product account to provide a difference; and if the desired value of funds in the leveraged index product account exceeds the current investment by more than a specified tolerance, 
 send the message to recommend a transfer of funds from the cash equivalent account to the leveraged index product account. 
 
     
     
         21 . The computer program product of  claim 14  wherein the user interface further comprises a field to choose return multiple, a field to specify an initial investment amount, and a field to allow the user to re-balance exposure. 
     
     
         22 . (canceled) 
     
     
         23 . The computer program product of  claim 14  wherein the theoretical position in the underlying index is a Theoretical Benchmark Exposure (TBE) which is determined according to:
   (TBE)= K*P *(1 +X )*(( K− 1)*( P )*( r )*( ip )). 
 where “P” is an amount of allocated assets; “K” is an leverage multiple of P; 
 where the value of K is less than a beta of the leveraged fund; “X” is the return of the underlying index; “r” is the broker call rate and “ip” is the investment period. 
 
     
     
         24 . A computing system comprises:
 a processor; and   memory for executing along with the processor a computer program product;   a computer readable medium storing the computer program product, the computer program product for rebalancing exposure to an underlying index in a leveraged exposure product comprises instructions for causing a computer to:
 periodically calculate in the computing system, a theoretical position in an underlying index corresponding to an index used in a leveraged index product; and based on the theoretical position, 
 determine the level of investment in an leveraged index product account that is required to provide substantially the same exposure to the underlying index as the exposure provided by the theoretical position in the underlying index, with the exposure provided by the theoretical position being within a range of 0.5% to 5%; 
 send a message indicating the level of investment to a user interface that is displayable on a user device, with the user interface having a field for a user to input a decision on the level of investment and 
 receive a response from the user device indicated the user's decision. 
   
     
     
         25 . The computing system of  claim 24  wherein the user interface is a graphical user interface. 
     
     
         26 - 30 . (canceled) 
     
     
         31 . The computing system of  claim 24  wherein the theoretical position in the underlying index is a Theoretical Benchmark Exposure (TBE) which is determined according to:
   (TBE)= K*P *(1 +X )*(( K− 1)*( P )*( r )*( ip )) 
 where “P” is an amount of allocated assets; “K” is an leverage multiple of P; 
 where the value of K is less than a beta of the leveraged fund; “X” is the return of the underlying index; “r” is the broker call rate and “ip” is the investment period.