Trading system

Abstract

An automated method, computer program product and system for using artificial intelligence based cognitive learning methods to enable the identification and optional implementation of trades for an organization security. The elements of value, components of value and categories of value of the organization are analyzed and modeled using predictive models that are developed by learning from the data associated with said organization. The output from these models is then used to calculate a market sentiment value that is used to determine the types of trades that will be recommended and optionally completed.

Description

CONTINUATION AND CROSS REFERENCE TO RELATED PATENT[0001]This application is a continuation of U.S. patent application Ser. No. 09 / 940,450 filed Aug. 29, 2001 the disclosure of which is incorporated herein by reference. U.S. patent application Ser. No. 09 / 940,450 is a continuation of U.S. patent application Ser. No. 09 / 421,553, filed Jul. 22, 1999. The subject matter of this application is also related to the subject matter of U.S. Pat. No. 5,615,109 for “Method of and System for Generating Feasible, Profit Maximizing Requisition Sets”, by Jeff S. Eder, the disclosure of which is incorporated herein by reference.BACKGROUND OF THE INVENTION[0002]This invention relates to a method of and system for business valuation, more particularly, to an automated system that identifies, evaluates and helps improve the management of the categories of value for a value chain and for each enterprise in the value chain on a continual basis.[0003]The internet has had many profound effects on global co...

AI Technical Summary

Benefits of technology

The present invention provides a new and useful system for calculating the value of a virtual organization using real option algorithms. The system automates the extraction and analysis of data from existing computer-based systems, increasing the scale and scope of the analysis. The system also eliminates uncertainty over which method is being used for comparison and ensures consistent application of the same set of valuation methodologies. The user has the option of specifying the total value and tracking changes in categories of value by comparing current and previously calculated valuations. Overall, the system provides a more accurate and realistic assessment of the value of a commercial enterprise and serves as a tool for improving the value of a commercial enterprise.

Problems solved by technology

Despite the widespread acceptance and use of “virtual value chains” as a mechanism for efficiently and effectively responding to customer demands, there is no known method or system for systematically evaluating the value of these new types of organizations.

The most popular traditional approaches to valuation are all based on some multiple of accounting earnings (a price to earnings ratio or P / E ratio)—with no corporate earnings in the past or the foreseeable future—these methods are of course useless in evaluating the new companies.

The inability of traditional methods to provide a framework for analyzing “virtual value chains” and internet firms are just two glaring examples of the weakness of traditional financial systems.

Numerous academic studies have demonstrated that accounting earnings don't fully explain changes in company valuations and the movement of stock prices.

Many feel that because of this traditional accounting systems are driving information-age managers to make the wrong decisions and the wrong investments.

All three companies were showing large profits using current accounting systems while their businesses were deteriorating.

These deficiencies of traditional accounting systems are particularly noticeable in high technology companies that are highly valued for their intangible assets and their options to enter growing markets rather than their tangible assets.

While these systems enhance the day to day management of the individual “soft” assets, there is currently no mechanism for integrating the input from each of these different systems in to an overall organization or enterprise asset management system.

As a result, the organization or enterprise can be (and often is) faced with conflicting recommendations as each system tries to optimize the asset it is focused on without considering the overall financial performance of the organization or enterprise.

Unfortunately, using current methods, the valuation of a business is a complex and time-consuming undertaking.

One difficulty with this method is determining the length of time the company is expected to generate the expected returns that drive the valuation.

One of the problems inherent in a steady state “residual” forecast is that returns don't continue forever.

Because the CAP is hard to calculate, it is generally ignored in income valuations however, the simplification of ignoring the CAP greatly reduces the utility of the valuations that are created with large residuals.

The usefulness of these valuations is limited because there is no correct answer, there is only the best possible informed guess for any given business valuation.

The usefulness of business valuations to business owners and managers is restricted for another reason—valuations typically determine only the value of the business as a whole.

Even when intangible assets have been considered, the limitations in the existing methodology have severely restricted the utility of the valuations that have been produced.

Problems associated with existing methods for valuing intangible assets include:1. interactions between the different intangible assets are ignored,2. the actual impact of the asset on the enterprise isn't measured,3. the relative strength of the intangible asset within the industry is just as important (and in some cases more important) than any absolute measure of its strength, and4. there is no systematic way for determining the life of the assets.

This, in turn affects the allocation of industry options to the market price for equity in the enterprise.

The lack of a consistent, well accepted, realistic method for measuring all the categories of business value also prevents some firms from receiving the financing they need to grow.

As a result, these businesses generally aren't eligible to receive capital from traditional lending sources, even though their financial prospects are generally far superior to those of companies with much higher tangible book values.

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