Message elimination in multi-model risk correlation system

11908,006

16/227674

December 20, 2018

A computer implemented method for cross asset correlation includes receiving, by a processor, portfolio data for a plurality of portfolios, determining, by the processor, a single portfolio performance vector for each of the plurality of portfolios based on a portfolio specific model, determining, by the processor, a joint portfolio performance vector for the plurality of portfolios based on portfolio specific models, determining, by the processor, for each portfolio, a portfolio specific scalar based on the single portfolio performance vector and the joint portfolio performance vector; and modifying, by the processor, a portfolio risk based on the portfolio specific model and the portfolio specific scalar.

Chicago Mercantile Exchange Inc. (Chicago, IL, US)

Chicago Mercantile Exchange Inc. (Chicago, IL, US)

1. A computer implemented method for cross asset correlation and margining in a trading system, comprising: receiving, by a processor, portfolio data for a plurality of portfolios; storing the portfolio data in memory, the memory implemented via one or more storage operations which implement local storage control via a rolling storage scheme storing portfolio data for a set of most recent transactions, thereby filtering the stored portfolio data to only the most recent transactions via the storage operations; calculating a first plurality of simulations for the each of the plurality of portfolios; performing a non-overlaid calculation by determining, by the processor, a single portfolio performance vector for each of the plurality of portfolios based on a portfolio specific model and results of the first plurality of simulations; calculating a second plurality of simulations for the each of the plurality of portfolios; performing an overlaid calculation by: determining, by the processor, an alphanumeric code for each of the plurality of asset classes (A k); compiling, by the processor, a request message for an external database storing one or more joint models for the plurality of asset classes (A k), where the request message includes the alphanumeric code for each of the plurality of asset classes (A k), the external database facilitating non-local storage of the one or more joint models for the plurality of asset classes (A k); receiving, by the processor and responsive to the request message, the one or more joint models for the plurality of asset classes (A k); determining, by the processor and based on the one or more joint models, a joint portfolio performance vector for the plurality of portfolios based on portfolio specific models and results of the second plurality of simulations; and determining, by the processor, for each portfolio, a portfolio specific scalar based on the single portfolio performance vector and the joint portfolio performance vector; and generating a plurality of messages that separate the overlaid calculation from the non-overlaid calculation for an initial margin for the plurality of portfolios based on the portfolio specific model and the portfolio specific scalar, wherein the number of the plurality of messages for the trading system is reduced for margin requirements due to the portfolio specific model and the portfolio specific scalar, wherein as asset class margin (Λ k) for each of the plurality of asset classes (A k) is calculated according to: Λ k =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the asset class margin (Λ k) according to a probability distribution for a profit and loss derived from the first plurality of simulations, wherein the joint margin (Λ joint) is calculated according to: Λ joint =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the joint asset margin (Λ joint) according to a probability distribution for the profit and loss (P&L) derived from the second plurality of simulations, wherein a reduced initial margin (IM) is calculated according to: IM=Λ k −w k ·Λ joint wherein the asset class margin (Λ k) is reduced by a contribution w k portion of the joint asset margin (Λ joint), wherein the reduced IM decreases a computation time for the trading system to process the plurality of portfolios.

2. The computer implemented method of claim 1 , further comprising: calculating a first margin value for each of the first plurality of simulations; and calculating a second margin value for each of the second plurality of simulations.

3. The computer implemented method of claim 1 , wherein the Percentile returns the P&L according to a probability (P): P (X>Λ joint)=1− CF wherein CF is a confidence level.

4. The computer implemented method of claim 1 , wherein an offset (θ) for a joint distribution for the first margin and the second margin is calculated according to: [mathematical expression included]

5. The computer implemented method of claim 1 , wherein the plurality of portfolios includes at least one portfolio of a first classification and at least one portfolio of a second classification, wherein the joint portfolio performance vector includes values for the first classification and values for the second classification.

6. The computer implemented method of claim 1 , further comprising: generating an instruction that does not move at least one position from the plurality of portfolios, wherein a single portfolio risk calculated from the single portfolio performance vector would indicate movement of the at least one position of the plurality of portfolios.

7. The computer implemented method of claim 1 , wherein the portfolio risk based on the portfolio specific model and the portfolio specific scalar is independent of a delta value for assets of the plurality of portfolios.

8. The computer implemented method of claim 7 , wherein the delta value is a change in one or more assets compared to a change in a price of a derivative associated with the one or more assets.

9. The computer implemented method of claim 1 , further comprising: calculating a first allocation of the portfolio risk for a first asset of the plurality of portfolio based on an initial margin for the first asset; and calculating a second allocation of the portfolio risk for a second asset of the plurality of portfolio based on an initial margin for the second asset, wherein a sum of the first allocation and the allocation corresponds to the portfolio risk.

10. A non-transitory computer readable medium storing processor-issuable instructions that, when executed by at least one processor, cause the at least one processor to: receive, at a trading system, portfolio data for a plurality of asset classifications; store the portfolio data in rolling storage via one or more storage operations which implement local storage control allowing storage of a set of most recent transactions, thereby filtering the portfolio data to only the most recent transactions via the storage operations; perform a non-overlaid calculation by: calculating a first performance vector for the first asset of the plurality of asset classifications based on a first asset model; and calculating a second performance vector for the second asset of the plurality of asset classifications based on a second asset model; perform an overlaid calculation by: determining an alphanumeric code for each of the plurality of asset classifications; compiling a request message for an external database storing a third asset model for cross asset correlation for the first asset and the second asset, where the request message includes the alphanumeric code for each of the plurality of asset classifications, the external database facilitating non-local storage of the third asset model for cross asset correlation for the first asset and the second asset; receiving, responsive to the request message, the third asset model for cross asset correlation for the first asset and the second asset; and calculating a third performance vector based on the third asset model for cross asset correlation for the first asset and the second asset; and calculate a plurality of messages that separate the overlaid calculation from the non-overlaid calculation for a margin requirement based on the first performance vector, the second performance vector and the third performance vector, wherein a quantity for the plurality of messages is reduced for the margin requirement calculation due to the first performance vector, the second performance vector and the third performance vector, wherein as asset class margin (Λ k) for each of the plurality of asset classifications (A k) is calculated according to: Λ k =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the asset class margin (Λ k) according to a probability distribution for a profit and loss derived from one or more simulations, wherein the joint margin (Λ joint) is calculated according to: Λ joint =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the joint asset margin (Λ joint) according to a probability distribution for the profit and loss (P&L) derived from the one or more simulations, wherein a reduced initial margin (IM) is calculated according to: IM=Λ k −w k ·Λ joint wherein the asset class margin (Λ k) is reduced by a contribution w k portion of the joint asset margin (Λ joint), wherein the reduced IM decreases a computation time for the trading system to process the plurality of portfolios.

11. The non-transitory computer readable medium of claim 10 , further comprising instructions that when executed by at least one processor, cause the at least one processor to: modify a portfolio risk based on the margin requirement.

12. The non-transitory computer readable medium of claim 11 , wherein the portfolio risk based on a portfolio specific model and the margin requirement is independent of a delta value for assets of the plurality of portfolios.

13. The non-transitory computer readable medium of claim 10 , further comprising instructions that when executed by at least one processor, cause the at least one processor to: calculate simulations for the cross asset correlation for the first asset and the second asset, wherein the third performance vector comprises results from the third plurality of simulations.

14. The non-transitory computer readable medium of claim 13 , further comprising instructions that when executed by at least one processor, cause the at least one processor to: calculate a first margin value for the first plurality of simulations; calculate a second margin value for the second plurality of simulations; and calculate a third margin value for the third plurality of simulations.

15. The non-transitory computer readable medium of claim 10 , further comprising instructions that when executed by at least one processor, cause the at least one processor to: generate an instruction that does not move at least one position from a plurality of portfolios, wherein a single portfolio risk calculated from the first performance vector and the second performance vector would indicate movement of the at least one position of the plurality of portfolios.

16. A cross asset overlay apparatus comprising: a memory; and a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, execution of the instructions causing the processor to receive portfolio data for a plurality of portfolios; store the portfolio data in the memory, the memory implemented via one or more storage operations which implement local storage control via a rolling storage scheme storing portfolio data for a set of most recent transactions, thereby filtering the portfolio data to only the most recent transactions via the storage operations; perform a non-overlaid calculation by calculating a single portfolio performance vector for each of the plurality of portfolios based on a portfolio specific model; perform an overlaid calculation by: determine an alphanumeric code for each of the plurality of asset classes (A k); compiling a request message for an external database storing one or more joint models for the plurality of asset classes (A k), where the request message includes the alphanumeric code for each of the plurality of asset classes (A k), the external database facilitating non-local storage of the one or more joint models for the plurality of asset classes (A k); receiving, responsive to the request message, the one or more joint models for the plurality of asset classes (A k); calculating, based on the one or more joint models for the plurality of asset classes (A k), a joint portfolio performance vector for the plurality of portfolios based on portfolio specific models; and calculating, for each portfolio, a portfolio specific scalar based on the single portfolio performance vector and the joint portfolio performance vector; and generate a plurality of messages that separate the overlaid calculation from the non-overlaid calculation for an initial margin for the plurality of portfolios based on the portfolio specific model and the portfolio specific scalar, wherein as asset class margin (Λ k) for each of the plurality of asset classes (A k) is calculated according to: Λ k =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the asset class margin (Λ k) according to a probability distribution for a profit and loss derived from a first plurality of simulations for the portfolio data, wherein the joint margin (Λ joint) is calculated according to: Λ joint =Percentile Θ (P&L), wherein Percentile is a function that returns a margin value for the joint asset margin (Λ joint) according to a probability distribution for the profit and loss (P&L) derived from a second plurality of simulations for the portfolio data, wherein a reduced initial margin (IM) is calculated according to: IM=Λ k −w k ·Λ joint wherein the asset class margin (Λ k) is reduced by a contribution w k portion of the joint asset margin (Λ joint), wherein the reduced IM decreases a computation time for the trading system to process the plurality of portfolios.

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