Alternative Asset Quality Scoring Through Stochastic Cashflow Modeling

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Solution Overview

Problem

Certain asset classes, such as artwork and alternative assets, lack robust markets for efficient valuation, hindering effective financial planning and management.

Innovation Solution

A computer-implemented method and system for evaluating and pricing alternative asset products using a quantitative stochastic model to forecast cashflow dispersion and compute a quality score based on risk versus return metrics, enabling credit rating and monitoring of Financings backed by these assets.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Measurement precision

If traditional valuation methods are used for alternative assets, then the valuation process is simple, but the valuation accuracy and reliability are insufficient due to lack of robust markets

Engineering Contradiction:

Improvevaluation accuracyVSAvoidvaluation process complexity

Core Design Contradiction:

Measurement precisionVSDevice complexity

Solution Approach 1:

The valuation process is segmented into multiple independent components: fundamental analysis for cashflow expectations, quantitative stochastic modeling for cashflow dispersion, and integrated risk-return assessment. This segmentation allows each component to be optimized independently while maintaining overall valuation accuracy for alternative assets.

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

A specialized valuation system acts as an intermediary between traditional valuation methods and alternative assets. This system incorporates both fundamental analysis and quantitative stochastic modeling to bridge the gap caused by inefficient markets, providing reliable valuations without requiring robust public markets.

Inventive Principle:

Principle #24Intermediary (Mediator)

2Reliability

If quantitative stochastic models and simulations are used to forecast cashflow dispersion, then the risk assessment accuracy is improved, but the computational complexity and time requirements increase

Engineering Contradiction:

Improverisk assessment accuracyVSAvoidcomputational time

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The system performs preliminary fundamental analysis to establish cashflow expectations before conducting quantitative stochastic modeling. This preliminary action reduces the scope and complexity of subsequent simulations by providing grounded baseline parameters, thereby reducing computational time while maintaining risk assessment accuracy.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system implements a multi-level modeling approach where quantitative stochastic models are applied selectively based on asset characteristics and risk requirements. For assets requiring high precision, full stochastic modeling is performed; for others, simplified models suffice, optimizing the balance between computational time and risk assessment accuracy.

Inventive Principle:

Principle #16Partial or excessive action

Data Source

PatentUS20250278791A1Heppner Schnitzer AltScore™ - Computer-Implemented Integrated Normalized Quality Scoring System for Alternative Assets

Publication Date: 2025.09.04 BENEFICIENT CO GROUP USA LLC

AI summary

Disclosed are computer-implemented quantitative stochastic model and simulation of cashflow dispersion forecasts influenced by fundamental evaluation of name specific risks for computing a metric indicative of risk versus return mapped to a quality score for an alternative asset.