Multi-Criteria Financial Optimization Visualization via Projection Vector-Function
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Solution Overview
Problem
Optimization models in finance, such as Asset Allocation and Portfolio Construction, generate results that are not effectively visualized in terms of distance from each asset class, as traditional Efficient Frontier charts do not provide analysis of risk/return scenarios for individual asset classes.
Innovation Solution
A system that graphically represents Multi-Criteria Financial Optimization (MCFO) results by selecting vertex points corresponding to portfolio components, defining coordinates, and plotting them on a chart using a projection vector-function, allowing for visualization of portfolios in terms of distance from asset classes and risk/return trends.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If traditional Efficient Frontier charts are used to visualize optimization results, then the chart structure remains simple, but the analysis of distance from asset classes and risk/return scenarios for individual asset classes is lost
Solution Approach 1:
The patent transforms the traditional 2D risk-return chart into a 3D visualization by adding a third dimension that represents distance from asset classes. This dimensional expansion allows simultaneous display of risk/return relationships and asset class proximity, resolving the contradiction by sacrificing chart simplicity to gain comprehensive analytical capability without losing information about asset class distances
2Loss of information
If simple line graphs are used for risk/return visualization, then the chart is easy to interpret, but trends in risk/return scenarios for each asset class cannot be analyzed
Solution Approach 1:
The patent segments the portfolio visualization by representing each asset class as a distinct vertex point in the 3D space, with portfolios plotted as points relative to these vertices. This segmentation allows users to analyze trends for each asset class individually while maintaining an overall chart structure that remains interpretable through standardized spatial relationships
Solution Approach 2:
The patent introduces projected coordinates as an intermediary mechanism that translates complex multi-criteria optimization results into a standardized 3D visualization format. This intermediary layer simplifies the interpretation process by providing a consistent spatial framework that mediates between the complexity of the optimization data and the user's need for intuitive chart reading
Data Source
AI summary
Described is a system including a memory arrangement and a processor for graphically representing in a space data representing at least one portfolio. The memory arrangement stores a Multi-Criteria Financial Optimization (“MCFO”). The processor solves the MCFO to generate data corresponding to a set of portfolios. The processor selects vertex points corresponding to a set of components of the portfolios. The processor defines coordinates of the vertices on a chart and plots the vertices as points on the chart. The processor defining a projection vector-function using coordinates of the vertices and selecting a subset of the portfolios on the chart. The processor computing coordinates for the portfolios in the subset using the projection vector-function and a weighting corresponding to the portfolios. The processor plotting points corresponding to the portfolios in the subset on the chart using the computed coordinates.