Methods and System for Financial Instrument Classification

Citation:

Kartoun U, Kartoun D.; 2013. Methods and System for Financial Instrument Classification. United States of America patent 20130046710 A1.
us20130046710.pdf2.22 MB

Abstract:

The invention relates generally to financial instrument classification and more particularly to methods and system for recognizing similarities in behaviors among financial instruments. According to one embodiment, a method of classifying similar financial instruments is provided. Classification analysis is performed on a desired financial instrument that a user specifies to determine other financial instruments that behave similarly to the specified financial instrument during a specified time range. Based on the classification, the similarly behaving financial instruments and additional characteristics are presented to the user for evaluation and tracking. FIELD OF INVENTION The present invention relates to financial instrument classification and more particularly, the present invention relates to financial instrument classification that is able to classify different financial instruments based on similarities in behavior patterns. BACKGROUND AND PRIOR ART Classification methods for financial instruments such as mutual funds, exchange-traded funds, stocks, and bonds, are commonly used to identify investments that meet one's personal criteria. Such methods aim to save time by narrowing one's search from hundreds of thousands of the worldly available investment choices down to a manageable number of specific investments for further research and examination. These classification methods (e.g., financial instrument screeners) facilitate a user to create a list of specific financial instruments he or she desires to further compare and analyze. This is achieved by letting the user specify comparison criteria applied to the list of financial instruments he or she is considering. Criteria include parameters such as performance history, investment style and category, and fees, to name a few. One disadvantage of current financial instrument classification systems is the lack of ability to classify different financial instruments based on similarities in behavior patterns. An example of a behavior pattern would be a time series of a financial instrument considered in a specific time period, wherein the time series is a sequence of data points that represent the daily change in the financial instrument price. The level of similarity between two financial instruments is determined by calculating a Similarity Rank value and described in more detail in the Detailed Description section. Another disadvantage of current financial instrument classification systems is that they require the user to be financially knowledgeable enough to create a list of financial instruments of interest and to have the ability to pick the appropriate criteria. Another disadvantage is the inability to classify financial instruments from different classes, for example, to find behavioral similarities between a certain stock and a certain mutual fund or between a certain exchange-traded fund and a certain bond. Another disadvantage is the inability to classify financial instruments from different stock exchanges and/or from different countries, for example, to find behavioral similarities between a certain Israeli mutual fund and a certain American exchange-traded fund.

Last updated on 12/20/2013