Axioma Awarded U.S. Patent for “Dynamic Volatility Adjustment” That Improves Factor Risk Model Responsiveness

NEW YORK–(Business Wire)–Axioma today announced that the company was awarded a patent for Axioma’s Dynamic Volatility Adjustment™ algorithm (DVA). This innovation improves the responsiveness and quality of Axioma’s equity risk models, while maintaining stability during critical shifts in market volatility. DVA supports the construction of factor risk models that better predict the future volatility of portfolio returns.

“DVA improves risk forecasts without increasing noise or turnover,” said Simon Bell, Director, Research, who developed the algorithm with Frank Siu, Director, Index Research.

Risk models base forecasts on historical data and they are typically slow to react during spikes or drops in market volatility. DVA provides an automated process that calibrates historical factor return weights in order to provide the most realistic model for the current volatility regime.

“Improved factor-factor covariance estimation is achieved even when the covariances change rapidly over time,” said Bell. “DVA helps factor risk models achieve better accuracy, responsiveness, and stability.”

Axioma is the only technology provider for portfolio managers that provides an entire suite of risk modeling capabilities, including off-the-shelf, fundamental, statistical, and macro modeling products delivered daily, as well as the ability to create custom risk models.

Axioma’s DVA algorithm is protected by U.S. patent #8,700,516, “Method and Apparatus for Improving Factor Risk Model Responsiveness.”

About Axioma:

Axioma is the leading provider of innovative risk-management and portfolio-construction solutions to financial institutions worldwide. With an emphasis on innovation, outstanding service and open-platform technology, Axioma gives its clients more choice, greater flexibility and increased performance. Founded in 1998, Axioma is headquartered in New York, with offices in Atlanta, Geneva, Hong Kong, London, San Francisco and Singapore. For more information, please visit www.axioma.com.

Axioma Portfolio Optimizer, Axioma Performance Attribution, Axioma Portfolio Backtester, Axioma Portfolio Analytics, Axioma Risk Models, Axioma Risk Model Machine and Axioma Risk are trademarks of Axioma, Inc. “Read more”