APPARATUS AND ACCOMPANYING METHODS FOR AUTOMATICALLY MODIFYING A FINANCIAL PORTFOLIO THROUGH DYNAMIC RE-WEIGHTING BASED ON A NON-CONSTANT FUNCTION OF CURRENT CAPITALIZATION WEIGHTS

摘要

Apparatus and methods for automatically modifying a financial portfolio havinga pre-defined universe of securities, such as, e.g., an index fund, thattracks a given capitalization weighted index, through dynamic re-weighting ofa position held in each such security. Specifically, in a computer system (50,60), a target weight is accorded to each such security, relative to others inthe portfolio, in proportion to a non-constant function of currentcapitalization weights of the securities in the index. Once these targetweights are determined, then, in response to both the target weight of eachsuch security and an actual weight, as a proportion of the portfolio, in whichthat security is currently held, a trade will be generated by the system inorder to conform, within a predefined band, the actual weight to the targetweight so as to rebalance the holdings in the portfolio. The system canselectively operate in either one of two modes: a dynamic rebalancing mode forcalculating new target weights and issuing appropriate trades, or a cashinvestment mode for issuing one or more trade(s) to consume excess cash thenheld in the portfolio.