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United States Patent
6957191
Belcsak , ; et al.
October 18, 2005
Title
Automated financial scenario modeling and analysis tool having an intelligent graphical user interface
Abstract
A financial scenario modeling and analysis tool, including a graphical user interface which enables a user of the tool to create a graphical model of a financial scenario, generally including at least one financial transaction, on a display screen, and an engine operable, in response to creation of the graphical model, to automatically generate information, such as financial or mathematical information, which at least partially models at leat a part of the financial scenario using information collected by the engine during creation of the graphical model. The graphical user interface enables the user to create party graphics respectively representing parties to the financial deal, and to generate financial instrument graphics representing financial instruments, wherein each financial instrument graphic connects two of the party graphics. The engine generates, in response to the creation of a graphical model, an instrument information, such as an object or template, for each of the instruments in the graphical model. The tool includes a natural date language and a formula language for use in modeling a scenario. The tool enables optimization of optimizable parameters defined in the scenario, and includes a user-friendly, book-like and CAD-like user interface.
Inventors:
Belcsak; Ladislav V.
(San Francisco,
CA
)
, Lee; Luke
(Fairfield,
CA
)
, Collop; David J.
(Oakland,
CA
)
, Bewsher; Mark R
(Tilburon,
CA
)
, Niemira; Thadeus H
(San Bruno,
CA
)
, Moritz; Dennis D.
(San Rafael,
CA
)
, Cohn; Stephen G.
(Orinda,
CA
)
Assignee:
Babcock & Brown LP
(San Francisco,
CA
)
Appl. No.:
530040
Filed:
September 14, 2000
PCT 102e Date:
September 14, 2000
PCT 371 Date:
September 14, 2000
PCT File Date:
February 3, 2000
PCT No:
PCT/US00/02776
PCT Pub Date:
August 10, 2000
PCT Pub No:
WO00/46717
Current U.S. Class:
705/38
705/39
715/700
Field of Search:
705/36,37,38,42,35,5 715/700,531
U.S. Patent Documents
5233514
August 1993
Ayyoubi et al.
5383113
January 1995
Kight et al.
5572644
November 1996
Liaw et al.
5839118
November 1998
Ryan et al.
5852811
December 1998
Atkins
5918217
June 1999
Maggioncalda et al.
5999918
December 1999
Williams et al.
Foreign Patent Documents
WO 00/13101
Mar., 2000
WO
WO 00/39736
Jul., 2000
WO
WO 97/38383
Oct., 1997
WO
WO 99/30261
Jun., 1999
WO
Other References
21.sup.st Century; Money, Banking and Commerce; Thomas P. Vartanian; Fried, Frank, Harris, Shriver & Jacobson; 1998; p. 13..~
Primary Examiner:
Olszewski; Robert P.
Assistant Examiner:
Gort; Elaine
Attorney, Agent or Firm:
Nixon and Vanderhye P.C.
Parent Case Text
CROSS-REFERENCE TO RELATED APPLICATION
This application hereby claims priority on U.S. Provisional Patent Application No. 60/118,743 filed on Feb. 5, 1999, the disclosure of which is hereby incorporated by reference herein in its entirety.
Claims
What is claimed is:
1. A financial scenario model creation and analysis tool that provides computer-aided design for financial transactions, comprising: a graphical user interface which enables a user of said tool to create a diagram of a financial scenario conceived by the user on a display screen, wherein said graphical user interface enables creation of said financial scenario diagram by enabling said user to: define parties involved in the financial scenario and add the parties to the diagram on the display in the form of graphical party objects; and define financial instruments involved in the financial scenario and add the financial instruments to the diagram in the form of graphical financial objects that each show a physical connection on the diagram between pairs of said graphical party objects in the diagram, wherein the user interface further enables the user to indicate a flow direction on the diagram between the pairs of said graphical party objects for an obligation related to the financial instrument connecting said pairs; a software engine operable, in response to creation of the diagram of the financial scenario, to create a mathematical model for said financial scenario using data collected by said engine during the creation of said diagram by said user, wherein creation of said mathematical model includes creating variables and mathematical relationships between variables based on content of the diagram; wherein said diagram and said mathematical model are linked within said tool, and said user interface enables the user to make changes to said graphical party objects and said graphical financial objects in said diagram, wherein when changes are made by the user to said diagram corresponding changes are made by said software engine to the mathematical model; and further wherein said user interface enables said user to perform an analysis of the financial scenario using the created mathematical model by changing values for the created variables within the mathematical model and viewing a result determined by the mathematical model.
2. The financial scenario model creation and analysis tool of claim 1, wherein said graphical financial objects indicate a relationship, relative to said financial instrument represented thereby, between said pairs of said graphical party objects.
3. The financial scenario model creation and analysis tool of claim 1, wherein said mathematical modeling includes financial instrument information for each of the financial instruments added to said diagram, and said graphical user interface enables said user to view and edit said financial instrument information.
4. The financial scenario model creation and analysis tool of claim 1, wherein said graphical user interface enables said user to enter and define date information relating to said financial scenario for use by said engine, and further wherein said graphical user interface is operable to display said date information in graphical form on said display screen.
5. The financial scenario model creation and analysis tool of claim 4, wherein said tool enables said date information to be entered using a natural date language, said engine being operable to process said date information from said natural date language.
6. The financial scenario model creation and analysis tool of claim 5, wherein said natural data language is used in said tool to specify either a single date or a series of dates relating to said financial scenario, and further wherein expressions used in said natural date language to define a series of dates include a start date, a frequency and an ending date.
7. The financial scenario model creation and analysis tool of claim 6, wherein said tool enables a plurality of possible outcomes to be modeled based on different date information provided by said user.
8. The financial scenario model creation and analysis tool of claim 1, wherein said engine is operable, in response to said addition of said financial instruments to said diagram, to define roles for parties represented by said graphical party objects which are connected by said graphical financial objects, wherein said roles are used by said engine to define said parties interaction with said financial instrument represented by said graphical financial object.
9. The financial scenario model creation and analysis tool of claim 1, wherein said engine is operable to determine an optimal result for said financial scenario relative to at least one aspect of the scenario, and to calculate optimal values for variables relating to said financial instruments represented in said diagram based on said optimal result.
10. The financial scenario model creation and analysis tool of claim 1, wherein said tool is operable to determine an optimal result for said financial scenario represented by said diagram.
11. The financial scenario model creation and analysis tool of claim 10, wherein said graphical user interface is operable to display said optimal result to said user.
12. The financial scenario model creation and analysis tool of claim 1, wherein said engine is operable, in response to creation of each of said graphical party objects, to generate a party-specific template for containing specific information on said party, a graphical user interface enabling said user to edit said information in said party-specific template.
13. The financial scenario model creation and analysis tool of claim 1, wherein said graphical user interface includes a worksheet section which enables said user to input scenario information, wherein said engine is operable to use said scenario information when creating said mathematical model of said financial scenario.
14. The financial scenario model creation and analysis tool of claim 13, wherein said worksheet is a non-cell based calculation interface wherein references used in calculations are based on a hierarchical outline and not on a positional reference.
15. The financial scenario model creation and analysis tool of claim 14, wherein said worksheet includes a formula language for use in creating scenario information, said formula language including a library of predefined functions and keywords.
16. The financial scenario model creation and analysis tool of claim 15, wherein said engine is operable upon entry of said scenario information in said worksheet section to establish links between related scenario information and between scenario information and date information, thereby establishing a dependence therebetween, and further wherein said engine is operable to use said links when creating said mathematical model of said financial scenario.
17. The financial scenario model creation and analysis tool of claim 15, wherein said formula language further includes a library of predefined prefixes for use in creating said scenario information.
18. The financial scenario model creation and analysis tool of claim 13, wherein said tool includes a library of predefined worksheets for use in said worksheet section, said graphical user interface enabling said user to select said predefined worksheets from said library of pre-defined worksheets.
Description
BACKGROUND AND SUMMARY OF THE INVENTION
The present invention relates to an automated tool for modeling the cash flows of financial scenarios, which typically involve use of at least one financial instrument, between various parties to a financial transaction by providing analysts with the ability to graphically represent the parties to the transaction, and their complex interrelationships in a manner that simplifies analysis of various options for completing the deal. In particular, the instant invention is directed to a modeling tool that analyzes various aspects of a proposed financial arrangement between parties to the transaction on the basis of information provided through a high level graphical user interface, and prepares competitive financial proposals, structures the proposals in an optimal manner, and which may further be used to manage and administer the final transaction to ensure compliance and delivery of the financial benefits determined by the tool.
The computer has become a critical tool for financial analysts whose job it is to analyze extremely complex financial transactions such as leveraged leases. The computer allows the numerous variables in such transactions to be manipulated and analyzed in a fraction of the time required for these calculations to be performed by hand. Of course, in order to allow a computer to perform useful functions, whether the area is financial analysis or virtually any other subject, software designed for the particular application is needed. Such software is often referred to as a "tool."
Certain software tools for financial analysis of complex transactions have been developed; however, they have inherent limitations and are very difficult to use for a number of reasons, including, for example, their inflexibility in altering existing models, their requirement of complex commands and codes for building and modifying a proposed model, and their inability to manipulate a financial structure at the higher level of an overview. The invention described herein was designed to overcome the problems with these earlier tools and represents a major advance in the field of financial engineering and analysis. The invention incorporates extremely sophisticated aspects of computer aided design (CAD) resulting in a graphical user interface unique to financial analysis. As a result, an analyst using the invention is able to quickly and easily analyze many different potential scenarios and to determine optimal terms for the particular transaction under consideration. For example, this novel approach gives the analyst the ability to see partial results when building a model, provides the financial analyst with dynamic overviews (pictures) of the financial structure that can be directly manipulated to alter the financial structure, and provides an object-oriented distinction between high level structure and financial details which allow the user to defer details until they become available or relevant.
As described in greater detail below, an important part of the invention is a computer software engine which has been designed to automatically obtain and generate information relating to a particular financial transaction or scenario in response to inputs from the user. The software engine and the CAD-like graphical user interface have been designed to work cooperatively together in order to create a graphical representation of the particular transaction or scenario on the screen of the analyst's computer. The system is designed to allow the analyst to cause this graphical representation to be manipulated, modified or revised so that information useful to many different aspects of the transaction or scenario can be quickly and easily obtained. The end result is a system that is easy to use, extremely flexible and far more efficient than prior financial analysis tools.
There are many automated financial engineering and analysis tools currently available for use by analysts to determine various components of a financial transaction and to optimize the transaction based on the particular data associated with the parties to the transaction. One such well-known tool is provided by Warren and Selbert, Inc., of Santa Barbara, Calif. and is referred to as "ABC". ABC has been used by analysts to generate various alternatives within the constraints of a particular financial instrument and optimize the results so that analysts can generate a deal that is acceptable to all parties to the transaction. One such commonly used financial instrument is referred to as a multiparty leveraged lease. There are various other proprietary systems that provide such automated financial analysis.
However, all of these known systems suffer from numerous disadvantages. For example, the ABC program, and others like it, require the use of complex commands and codes for building and altering a proposed model. Moreover, the models typically must be built prior to having the ability to view any intermediate results. This, in combination with the complex programming-like language that is required, results in a very long learning curve for analysts who use the tool. Furthermore, the model, once built and run, does not typically enable the analyst to easily change variables or to easily view the resulting change in the transaction.
A primary source of these problems is the complex and inflexible user interface typically associated with these known tools. Another problem with such prior art tools is that they do not enable a user to model the financial deal visually and mathematically and in a manner which enables interfunctionality and dependency between the visual model and the mathematical model. As a result, the tools currently in use provide limited ability to deal with higher levels of complexity and the ever expanding universe of evolving financial products in use today, and which will be used in the future. Additionally, the inflexible interface makes it very difficult for different analysts to be able to discern the exact relationships and variables of a model that another analyst may have been manipulating when the model was being built and later modified.
To overcome the above and other shortcomings with prior art financial modeling tools, the present invention provides a much more user friendly, flexible tool incorporating easy to understand graphics and interfaces to enable more efficient and practical application of the tool. To that end, the invention provides a financial modeling tool that addresses model complexity with a graphical CAD-like approach to financial and/or mathematical modeling, which facilitates, among other things: the ability to see partial results while building a model; a short learning curve; the ability to make changes when the user views the results of the analysis; flexible "point and click" interfacing; easy handling of indexed data; integrated and automatic handling of certain variables, e.g., taxes and accrual; menu of building blocks, e.g., loans, rents, fees, purchases, etc.; menu of built in reports; and an interactive and intelligent graphical representation of the model.
In accordance with an important aspect of the instant tool, a software engine, hereinafter referred to as "engine", is provided in the tool and is programmed to automatically obtain and generate information on a financial scenario in response to the user creating a graphical representation of the scenario with the CAD-like user interface. In other words, the manipulation of the graphical user interface to generate a visual representation of the scenario automatically results in the generation of information, such as formulas, objects, templates, timelines, calculations, constraints, parameters, optimizable parameters, cash flows, reports, or any other suitable information that is helpful in modeling the scenario represented by the visual representation created by the user using the CAD-like interface. The information generated preferably at least partially model at least a portion of the scenario. After drawing a scenario, such as a proposed financial deal, using the interface, the interface enables the user to enter data and formulas, edit the information automatically generated by the engine in response thereto, and to further define the scenario in a manner which enables the engine to fully model and analyze the scenario. Once the scenario is fully modeled, the tool gives the user the ability to instruct the engine to attempt to optimize the scenario, either directly or by creating formulations to be optimized and passing the formulations to a separate optimizing program. Once the deal is optimized, the results can be viewed by the user using the interface. The scenario can also be modified by the user and new results based on the modification can be viewed. When the visual representation of the scenario is modified, the engine automatically modifies the information previously generated in a manner which corresponds to the modification to the visual representation.
In accordance with a main aspect of the instant invention, a financial transaction modeling and analysis tool is provided which includes: a graphical user interface which enables a user of the tool to create a graphical model of a financial scenario, generally including at least one financial transaction, on a display screen; and an engine operable, in response to creation of the graphical model, to generate information which at least partially models at least a part of the financial scenario using information collected by the engine during creation of the graphical model.
The graphical user interface preferably enables the user to create party graphics respectively representing parties to the financial scenario, and to generate financial instrument graphics representing financial instruments, wherein each financial instrument graphic connects two of the party graphics. The party graphics and the financial instrument graphics define the graphical model of the financial scenario. Preferably, the financial instrument graphics indicate a direction of flow, relative to the financial instrument represented thereby, between the parties connected by the financial instrument graphic.
In accordance with an important aspect of the instant invention, the engine generates, in response to the creation of a graphical model, an instrument information, such as an instrument object or template, for each of the instruments in the graphical model. Once an instrument is defined, the graphical user interface enables the user to interact with the instrument information, such as adding scenario specific instrument data to each of the instrument objects generated by the engine. The instrument data entered in connection with the instrument object constitutes either a fixed part of the financial scenario or a variable part of the financial scenario.
The graphical user interface also enables the user to enter and define date information relating to the financial transaction for use by the engine. Preferably, the graphical user interface is operable to display the date information in graphical form on the display screen. The tool preferably enables the date information to be entered using a natural date language, wherein the engine is operable to process the date information from the natural date language.
In accordance with another aspect of the invention, the graphical user interface enables the user to modify the graphical model of the financial scenario, and the engine is operable, in response to the modification of the graphical model, to modify the information previously generated in accordance with the modification of the graphical model.
In accordance with another aspect of the invention, the engine is operable, in response to the creation of the financial instrument graphic, to define roles for parties represented by the party graphics connected by the financial instrument graphic, wherein the roles are used by said engine to define the parties interaction with the financial instrument represented by the financial instrument graphic when modeling the financial scenario.
The engine is preferably operable to determine and display an optimal solution or result for the financial scenario relative to at least one of the parties thereto, and to calculate optimal values for each of the variables defined by the instrument data based on the optimal solution.
The financial transaction modeling and analysis tool of the instant invention preferably includes an extensible library of predefined financial instruments, and the graphical user interface enables the user to select and use one or more of the predefined instruments during creation of the graphical model of the financial scenario. In other words, numerous common and canned financial instruments are provided to the user to facilitate easy modeling of common transactions that may be used in financial scenarios.
In accordance with another aspect of the invention, the engine is operable, in response to creation of each of the party graphics to generate a party-specific information on the party, and the graphical user interface enables the user to retrieve and modify the information in the party-specific information.
In accordance with another aspect of the invention, the graphical user interface includes a worksheet section, also referred to herein as "smart paper," which enables the user to input scenario information which is independent of or supplementary to the date and instrument information relating to the financial scenario, and the engine is operable to use the scenario information when modeling the financial scenario. Preferably, the instant tool includes a formula language for use in creating the scenario information, wherein the formula language includes a library of predefined functions and keywords which can be used by the user when creating the scenario information.
The worksheet section is preferably a non-cell based, outline based interface for inputting data and formulas in an outline format. More particularly, the worksheet, also called "smart paper" herein, is a non-cell based calculation interface wherein references are based on a hierarchical outline rather than a position reference. In a preferred embodiment of smart paper, the interface enables one formula per row to be defined in an outline-type format.
The engine is preferably operable upon entry of scenario information, such as deal formulas, in the worksheet section to establish links between related scenario information and between scenario information and date information, thereby establishing a dependence therebetween, and further wherein the engine is operable to use the links when modeling the financial scenario. Preferably, the tool includes a library of predefined worksheets for use in the worksheet section, and the graphical user interface enables the user to select predefined worksheets from the library for use in the worksheet section.
The instant tool also enables a plurality of possible outcomes to be modeled based on different information provided by the user.
In accordance with yet another aspect of the invention, the graphical user interface is presented on the display screen in a book-like configuration in which a plurality of different sections of the graphical user interface are represented by different chapters in the book-like configuration, each of the chapters having a tab graphic associated therewith, wherein upon selection of the tab graphic by the user, the user interface is operable to display the chapter associated therewith. Preferably, the tab graphics are located along a side of the display screen, and each chapter may include a plurality of pages, the pages having page tab graphics which are also displayed to the user when a chapter having the pages is selected by the user.
Preferably, the graphical user interface enables the user to view two of the chapters simultaneously in a split-screen format on the display. The engine is preferably operable to update information in each chapter in response to changes made by the user in a chapter.
In a preferred embodiment of the graphical user interface, the chapters include a diagram chapter for creating the graphical model, a parties chapter for providing data relating to the parties, a time chapter for viewing and editing dates associated with the financial deal, an instruments chapter for viewing and editing instrument data, a worksheet chapter for enabling the user to define scenario information or formulas relating to the financial scenario, an optimization chapter for use in optimizing the financial scenario, a payment chapter for viewing payment flows in the financial scenario, and a reports chapter for enabling reports to be generated relating to the financial scenario.
BRIEF DESCRIPTION OF THE DRAWINGS
These and other objects, features, aspects and advantages of the instant invention will become apparent to one skilled in the art upon review of the detailed description of the invention provided herein when read in conjunction with the appended drawings, in which:
FIG. 1 is a block diagram showing the major components in the modeling and analysis tool of the instant invention;
FIG. 2 is a flow chart showing the main functions and steps involved in using the modeling and analysis tool of the instant invention to model and analyze a financial scenario;
FIG. 3 is a flow chart showing the main steps used to create a graphical model of a financial scenario, in accordance with the instant invention;
FIG. 4 is a flow chart showing the main steps used to create a worksheet, also referred to as "smart paper", for use in connection with modeling of the financial scenario, in accordance with the instant invention;
FIGS. 5-12 show, in a split screen format, exemplary information that is automatically generated by the engine in various chapters of the instant tool in response to creation of the exemplary graphical representation of a financial scenario shown in the Payment Diagram chapter.
FIG. 13 shows a graphical diagram of an exemplary financial deal created in accordance with the instant invention;
FIG. 14 shows a party graphic being made in the parties chapter as a first step in modeling the deal of FIG. 13, in accordance with the instant invention;
FIG. 15 shows a further step in creating a graphical modeling the deal of FIG. 13, wherein two parties and a financial instrument are shown, in accordance with the instant invention.
FIG. 16. shows date information related to the exemplary deal of FIG. 13 being displayed in the time organizer chapter of the graphical user interface of the instant invention.
FIG. 17 shows another view of the time organizer of FIG. 16, where an early buy-out option is displayed;
FIG. 18 shows a view of the instruments chapter containing data relating to the exemplary deal of FIG. 13;
FIG. 19. shows an enlarged, partial view of the display screen of FIG. 18, wherein the interest rate is being modified;
FIG. 20 shows a view of the smart paper chapter of the instant invention containing information from the exemplary deal of FIG. 13;
FIG. 21. shows the constraints sub-chapter of the optimization chapter of the instant invention, containing information from the exemplary deal of FIG. 13;
FIG. 22. shows an exemplary report produced in the reports chapter of the instant invention based on the exemplary deal of FIG. 13; and
FIG. 23. shows the payment organizer chapter of the instant invention containing information on the exemplary deal of FIG. 13.
FIGS. 24-29 show example uses of the smart paper feature of the instant invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
Referring now to the drawings, FIG. 1 shows an overview of the main elements which comprise a preferred embodiment of the financial scenario modeling and analysis tool of the present invention. More particularly, as shown in FIG. 1, the tool 10
includes a user interface 12 which preferably enables both builder users 16 and end users 18 to interact therewith, a software engine 14, an optimizer system 20, which is preferably a software package known as CPLEX Optimization (version 6.0) offered by CPLEX, ILOG CPLEX Division, but any other suitable optimization software may be used, file I/O and support functions 22, output device(s) 26 such as a printer, and a hard disk 24 or other storage device for use in storing information and data provided with the tool 10 and input by the users thereof. The engine 14 performs all calculations when modeling a deal using the tool, including parsing of the formula inputs. The engine 14 also reduces the data representing the deal into an abstract form for submission to the optimizer 20 in order to perform optimization functions for the deal. The user interface 12 and the engine 14 are the main elements of the present invention and will be described in greater detail below.
In order to enable a better understanding of the instant invention, the following glossary of definitions are provided for terms commonly used herein to describe the instant invention:
Smart Paper--is one of the chapters in the user interface of the tool. Smart Paper is a non-cell based calculation interface wherein references are based on a hierarchical outline as opposed to a positional reference. Smart Paper is also referred to herein as a "worksheet."
Party--represents a potential (or actual) participant in a financial transaction or scenario, and as such its meaning is close to that of colloquial English. Parties connect to the roles of instruments to define the financial interactions among the parties.
Instrument--is a tool object that encapsulates an atomic financial transaction among a pair of parties, including the tax consequences and classification of the transaction (e.g. rental payments).
Role--is a party connection point of an instrument that defines how the party interacts with the instrument.
Key Date--is a globally available date defined by the user in the Time Organizer.
Date Stream--is a chronological pattern of dales that defines both discrete dates and their relationship to time periods.
Timeline--is a globally available Date Stream defined in the Time Organizer that can be used for synchronizing payments and data throughout a user's model.
Decision--represents a "yes or no" option at some point in time that is available within the transaction being modeled with the tool, wherein the tool then tracks both the "yes" and "no" results.
Outcome--is the result of some specific set of assumptions regarding Decisions, i.e. a specific assumption as regards the "yes" or "no" of each Decision (see also ACOE below)
Alternative Courses of events (ACOE)--is the full set of possible Outcomes in a model, all of which are active within the model. For example, a deal or scenario may include the leasing of an airplane over 20 years where the lessee has the option to buy the plane after 10 years. One outcome of the case is the 20 year lease, the other would be the 10 year buy out option.
Decision Handler--is the mechanism within Instruments that defines the action for a "yes" Decision.
Parameter--is a piece of information within a case which has a name, a mathematical formula, and a value. The value can be a number, date stream, formula or other item.
Case--A case is a single file created with the tool which has all the different elements of a single deal or scenario.
Referring now to FIG. 2, there is shown a general overview of the main steps, according to a preferred embodiment of the present invention, which are followed when using the tool 10 to model and analyze a financial scenario, deal or transaction. As will be described in greater detail below, the tool 10 provides a graphical CAD-like interface which is used to model the flow of financial instruments and data between various parties to a financial scenario, including individual, corporations, institutions and/or the like. In accordance with the instant invention, the tool enables users to visually define the parties involved in the scenario and, for example, the flows of money and assets in the form of a graphical model of the scenario. Parties are preferably represented by boxes which display the name of the party. Arrows are preferably used to represent the flows of instruments. Once the model is defined in the tool in graphical form, the specifics of each party and the flows are further defined in various interfaces until the model is fully defined.
If the model as defined satisfies the requirements of all parties involved, the tool provides an interface which enables the user to create various reports relating to the model generated for the scenario. These reports include, for example, the flow of instruments and assets over various time periods. On the other hand, if variables exist in the scenario based on requirements of the parties, the tool enables the scenario to be optimized. For example, the deal may require that a party obtain a return on investment of at least 5%. The party may desire an even greater return provided all other aspects of the model of the scenario are satisfied. Such requirements are known as constraints of the model. The process of optimization involves creating the best model which satisfies all such constraints and determines the best possible model based on the requirements and goals of the parties. The instant tool enables optimization against a number of constraints that may exist in the scenario.
The tool operates in two basic modes: build mode and end user mode. In build mode, the user creates the definition of certain aspects of the tool, such as creating instruments which model real world financial instruments. These instruments are then stored in the tool for use by end users when modeling a scenario using the tool. In other words, the builder user provides a library of "canned" instruments which can be used by the user to more easily and efficiently model the scenario with the tool. The instruments involve a set of inputs and calculations based on those inputs. The end user incorporates the built instruments into a model and supplies the real inputs corresponding to the actual deal that is being modeled. The build user mode also enables the builder user to create calculation templates to be used by the end user in conjunction with various instruments.
FIG. 2 illustrates the steps performed by the end user when using the tool to model a scenario. More particularly, when a deal opportunity 28 is presented to a user of the tool, the first step 30 is for the user to draw a graphical diagram of the scenario using the CAD-like user interface section of the tool. Once the diagram is drawn, the next step 32 is to define and modify dates relating to the scenario. Once the dates are defined, the next step 34 is for the user to modify data and numbers in a worksheet section, also referred to herein as "smart paper", in order to provide all of the information necessary to model the deal. If the deal is determined to be acceptable in step 36, the user can generate reports (step 40) using a reports section or chapter of the tool, and then the scenario or deal can be presented (step 46) to the client or the person contemplating participating in the deal. If the deal is not accepted in step 36, but optimization is not desired or possible based on the particular deal, the user can review all of the input (step 44) and edits or modify the deal as needed to make the deal acceptable. If optimization is desired, the user can run the optimizer (step 42) and then review the optimized deal. If the optimized deal is then acceptable, the user can run reports and present the deal to the client (steps 40 & 46).
As indicated above, one step involved in modeling a deal using the tool of the instant invention involves creating a party diagram (step 30) or graphical model of the deal. FIG. 3 shows flow chart of the steps involved in creating this graphical model. Similarly, FIG. 4 shows the preferred steps involved in creating smart paper or a worksheet in step 34 of FIG. 2. It is noted that the flow charts of FIGS. 2 and 3 are self-explanatory. Thus, no further explanation of the particular steps in the flow charts of FIGS. 3 and 4 are provided at this time. However, further details regarding model creation and smart paper use are provided below.
The Graphical User Interface (GUI)
The following is a description of the functionality of the present invention in terms of the graphical user interface (also referred to herein as "GUI"). It is noted that, in accordance with the instant invention, the GUI may be implemented using Windows 98, Windows NT, MAC, or it may be Web-based. In other words the instant system may be implemented on any suitable standalone, networked or web-based platform. In a preferred embodiment, the tool can be implemented using the following hardware, however any suitable hardware may be used in accordance with the invention: A Pentium compatible machine running Windows NT 4 with service pack 3 64 Megabytes Ram 45 Megabytes hard disk space Cplex Optimization software version 6.0 Actuate reporting modules including all DLL's and OCX's (Actuate is a commercially available reporting technology) Version v4.72.2106.4 or later of ComCtrl32.dll
The instant invention preferably uses a book-like display as a viewing device. More particularly, the invention displays its data as pages in a familiar-looking tabbed notebook configuration on the display screen. Each tab of the notebook represents a "Chapter", corresponding to one part of system's functionality. Users can work with one copy of the book visible (see FIGS. 14-18 and 20-23), or with two copies visible at once (see FIGS. 5-12). Viewing two copies of the book lets the user see related "pages" in both chapters simultaneously. When two book copies are visible, the books can turn each other's pages, so the user can click on a model component in one book to see more detail about that component in the other book. Preferably, the user should never be more than a couple of clicks away from seeing any part of the model or system. The GUI is designed so that the user never feels lost inside the program.
The first chapter in the GUI is the Payment Diagram (see FIGS. 14 and 15), which provides a graphic boxes and arrows overview of the relationship among parties and instruments, as well as the payments the parties make to one another. This is valuable because ideas for financial structures are often presented as boxes and arrows drawn on paper. The payment diagram provides an analogous representation. However, as explained herein the payment diagram represents much more than simply a graphic diagram. The user can control or create the program's model by modifying the picture or graphical representation of the deal shown in the payment diagram. An advantage of this approach is that there are no separate languages to learn and no complicated controls to master. The GUI provides for instantiation and deletion of parties. The user can drag-and-drop a box onto the diagram to create a new model participant, and can delete a box to remove a model participant. The GUI provides for instantiation and deletion of arrows representing financial instruments which, in turn, represent payments made by one participant to another, and/or represent the tax effects of those payments. The user can rearrange who pays what to whom by moving the instrument arrows from one box to another. The GUI also enables selection of an overview by possible outcome. In other words, in transactions with several contingencies, it is often helpful to show only those payments contingent on a particular decision path. The user can rearrange the participant boxes on the diagram using a drag-and-drop method. The connected instrument arrows follow automatically in response to the drag-and-drop operation. The GUI provides a list of pre-defined instrument types immediately upon creating the instrument. Double-clicking on an instrument and party tells the system to show detailed information about that instrument or party. Clicking the second mouse button offers a list of actions appropriate for the instrument or party clicked. The GUI also provides navigation to the Payment Organizer (preset for specified party) via the second-mouse-button menu
The next chapter is the Parties chapter. The program simulates "parties," which are entities that participate in a financial transaction. It provides automatic creation and deletion of party-specific information. This party-specific information includes items, such as tax rates, fiscal-year-ending months, or yield requirements. The GUI provides support to the Payment Diagram for party detail information. The GUI also provides the user with a standardized and extensible location for party data. Each party can have individual tax attributes, paying different kinds of taxes to different governments (U.S. states or foreign countries).
The next chapter is the Time and Decision Organizer, which is also called "Time Organizer" in the program for short (see FIG. 16). In this chapter, the GUI provides users with control of globally available (case-wide) key dates, timelines and outcomes (from decisions). This is important because: (a) transactions often require numerous payments to be synchronized; (b) payments are often contingent; (c) contingencies can interact or cancel each other out; and (d) having all these in one place, and graphically editable, can make a transaction much easier to explain and understand. In addition, the GUI provides the ability to create, delete, and edit Key dates, timelines and decisions. This is important because: (a) assumed closing dates usually have to change; (b) there are constraints on when important deal events are allowed to occur; and (c) deal economics can be enhanced or harmed by proper choice of such dates. The GUI also provides a graphic overview of key dates. Also provided is a graphic overview of instrument payment date streams, aggregated by timelines. This lets the user see quickly whether the model's payments are properly synchronized. The system also provides graphic control of decision interaction to create and delete mutually exclusive outcomes. The user can thus see whether decisions occur in the proper order, and that they are also properly contingent on each other. The GUI also provides the user with control over the global default for "Calendar" (conventions used for counting the number of days in an interval). This makes it easy to modify a model's calendar convention for use in Europe, Asia, or the U.S., in addition to following the particulars of any model. The GUI also provides a "default" timeline to synchronize newly created Instruments' activities automatically.
The next chapter is the Instruments Chapter (see FIG. 18). Instruments are the containers for the systems built-in financial expertise. They handle a lot of the routine bookkeeping that financial models demand, leaving the user free to concentrate on the nonroutine business aspects of the transaction. The GUI of this chapter provides controls for creation and definition of payment streams between parties, and the tax effects of such payments on the paying or receiving party. An expandable library of instruments keeps the system up-to-date. Instruments have clearly separated and protected "input" and "output" sections, so all users can rely on their integrity. The system connects parties (badges) to payment streams via role definitions and allows the user to switch parties. This is how the model knows which parties pay or receive the payments the instrument defines. This chapter also connects payment streams to payment organizer classifications (cash and income badges) via role definitions and allows users to change the classification. This is how the model puts labels on each payment, so that it can show up in an informative place on summary reports.
The system allows paying and receiving parties to have distinct interpretations of the instrument payments, tax effects, and classification. This is an important feature, because tax law often makes these distinctions. Instruments contain pre-built and pre-tested Smart Paper computation sections, making the system more reliable and freeing the user from having to do repetitive programming. The system automatically activates and deactivates instrument Smart Paper computation sections according to the user's selection of role information for the parties. Thus, sections not in use remain visible and available and do not distract the user. Glyphs are used to highlight the relationship between role specifications and the calculations. Specific items representing payment or receipt of funds, or of taxable income or deductions, are identified with symbols that make those items easy to find. The system also allows the user to change the name of the instance of the instrument. These name changes show up on the party diagram and the payment organizer, making both of these a lot easier to read and understand. In addition, model pieces can be named with the names that other transaction negotiators are using, making communication a lot easier. The system also automatically generates the parallel payment streams for different outcomes using handlers for each possible decision. Each instrument can thus generate different specific payments depending on the state of various contingencies. This is important because exercise or non-exercise of certain options can mandate different behavior on the part of the same instrument. The system allows the user to modify the handlers' termination behavior. Thus, special cases do not require modifications to the system. In addition, the system uses Smart Paper "protection" modes to preclude user corruption of instrument functionality, but otherwise allows users the ability to modify instrument Smart Paper. Thus, users can be confident that canned (and therefore tested and reliable) model parts are being used, instead of model parts which may not be correct given an unforeseen peculiarity of a particular model.
Users can supply their own formulas. Such formulas are clearly marked, so that other users know they have to validate the formulas before using the model. The system also provides canned calculations for specific types of financial elements (e.g. rent, loans, etc.). These canned calculations cover a very large fraction of the payments users would run into when modeling a financial scenario. Thus, users will spend little time having to invent new payment mechanisms. In addition, this set of canned calculations is contained in an expandable library, so as the industry changes, additions can be added to the library to keep it up to date. The system provides the user the ability to customize the calculations, making use of the invention a lot easier. Pre-defined reports of the instrument results are also provided. As a result, explanations of what an instrument is doing are only a click away. The system also allows the user to specify that an instrument only exists when a certain decision is assumed. Contingent instruments can be put into the model and will thus automatically be properly handled. The system also supports automatic decision and outcome creation for termination values and other make-whole payments. These contingency dates are too numerous to include as separate instruments or outcomes, and so including them here provides a compact way of computing them as a class. In addition to general financial instruments, the system may also include instruments for advanced corporate finance operations, such as mergers, acquisitions and the like.
The next chapter is the Smart Paper chapter (see FIGS. 20 & 25-29). Smart paper is a powerful non-cell based calculation interface wherein references are based on a hierarchical outline as opposed to a positional reference. Unlike spreadsheet programs, smart paper is non-cell based and does not rely on a positional reference for use in calculations. Smart paper is the bridge between the ease-of-use that spreadsheet users depend on, and the power of financial and optimization packages. It makes computations visible, understandable, and accessible. Users do not need to be computer programmers or learn to work as programmers in order use the system effectively and efficiently. The system has enhanced data capabilities, which automatically perform a lot of rote date-related manipulation that makes spreadsheets hard to create and even harder to modify. Thus, the system provides capabilities normally found in relational database packages. The smart paper chapter is the component where the user specifies the computations he wants the system to perform. Users can define values directly, or they can provide a formula which will tell the system how to compute the desired values. Smart paper provides user control over outline-like (i.e. tree-like) format of parameters and several nested layers of headings. This makes Smart Paper work much more readable, and provides a mechanism for the system to resolve (or ask the user to resolve) formula ambiguities. Smart paper allows the user to create one or more sheets of smart paper. Related computations can be kept together, and unrelated ones can be segregated. Tabs are provided for moving among sheets of smart paper. As a result, users do not feel lost in the program and are able to find quickly what they are looking for using the GUI. The GUI provides controls for viewing "formulas" versus "results" or both. Thus, users can get immediate feedback as to whether they have properly specified a formula. The GUI provides editing capabilities for headings and parameter names, as well as provides access to the template library and instantiation of templates. Smart paper defines parameter name scope and parameter index scope automatically via outline format. This resolves many "name clashes," which would be otherwise inevitable in a model of any size. It also provides a view of dependency relationships among parameters. Users can thus identify information relationships among their parameters. Also provided is general support goal-directed "search" for setting parameter values. The system automates some of the trial-and-error involved in changing parameters' values in order to produce the desired answer. It also allows the user to specify formulas that define (dynamically) activation/deactivation of sub-trees. This gives models the ability to be "context-sensitive," responding sensibly to particular values of input data. It also provides capability for import/export of data and formulas from/to Microsoft EXCEL or the like. Models can be created using the system and the system will automatically reconstruct the model in Microsoft EXCEL.
The GUI also provides a date stream bar that always displays the index of the uppermost indexed stream. The important pairing between dates and date-indexed data is therefore always visible on the screen. This eliminates a lot of meaningless clicking back and forth to keep the index visible, and eliminates the need for a lot of "split-screen" display. The GUI supports multiple data-entry modes: simple-edit, full-edit and rapid-entry. These modes make constructing models easier and faster. Also, smart paper items (e.g. headings, templates, formulas, indexes) can be changed into each other. Tool bar and menus provide editing to morph, promote, demote, insert, and delete operations. This eliminates the need for learning a lot of jargon. Instead, all the alternatives are displayed, and the user can choose the most logical one. The system also provides graphic feedback as to the type of indexed data represented by parameters. Moreover, in accordance with the invention formulas for dates resemble "English-language" instruction. Formulas can be printed, providing human-readable documentation for a model. This differs significantly from spreadsheets, wherein formulas consist largely of a list of data locations instead of identities, resulting in a nearly useless documentation tool for a human. The system creates templates as white-box functions which allow the user internal access. Thus, there is no need to refer to external, written documentation to figure out what a template/function is doing, because all the code is right there, visible.
In addition, smart paper has an extremely powerful formula language (with input/edit wizards). This formula language automates many tasks which are routine in finance but which are now cumbersome for spreadsheet users. The formula language, which is described in greater detail below, has the following exemplary features:
Uses Prefixes attached to formulas to define special types of parameters for-- Accrue: Automated accrual over time periods Table/Interpolate: Data Tables (regular and interpolated) Advance: Advance payments Arrears: Arrears payments StartDates: Date streams that represent the start of time periods EndDates: Date streams that represent the end of time periods List: Named members of an ordered set. ActsLike: Ties one parameter's type to the type of another parameter.
Uses Prefixes attached to formulas to define goal-oriented setting of parameter values Optimize: To have values set by the Linear Programming optimizer. Search: To have the system set a parameter value based on a defined target result.
Single formula defines entire array of data.
Array data is keyed by index parameter. Thus, there is provided what amounts to a relational database structure, without making users learn a bunch of relational database jargon.
Intelligent translation of data from one index to another based on the dates and the prefix type.
Relational database capability without making users use a separate program or even learn relational database jargon.
Automatic maintenance of minimal name expansion for parameter references. Names are thus presented as short as possible, keeping the mental burden down and reducing the possibility for confusion.
Intuitive, English-like and flexible syntax (and wizards) for creating date streams. These date streams can thus be easily changed and maintained, unlike spreadsheets, which are very rigid in their handling of this information.
Parameter labels define the parameter name for formula references. This is different from spreadsheets, in that, in spreadsheets, values are identified generally by where they are, not by their names (despite a cumbersome facility spreadsheets offer for naming cells).
Notes can be added to any heading or parameter, and the identify of the user making the note is recorded. This helps with auditing and documentation of models.
Assertions can be added to any parameter. Assertions let a "product manager" create models and guide future users in the model's use.
Optimization constraints can be added to any parameter.
Optimization constraints can be "OR'd" together to make a single constraint that is satisfied by any one. Users do not need to deal with linear programming jargon, which is often unfamiliar to them. This makes it easy to specify commonly desired constraints that are difficult to implement with binary variables in a strict "linear program" setup.
An activation formula can be attached to a constraint that makes the constraint inactive when the formula evaluates false. Thus, constraints can be "data-driven." This lets model builders build models for less-sophisticated users, who can operate complicated models by providing values for variables.
An activation formula can be attached to a heading to make the sub-tree (for which it is a root) inactive when the formula evaluates false.
Glyphs reflect the existence of notes and assertions including the pass/fail state of assertions. Thus, the user doesn't need to open a parameter in order to tell whether a note or assertion is inside it.
Glyphs indicate the protected state (if any) of the parameters.
Allows for partial null data in an array.
The "Collect . . . ( )" functions let models be defined concretely ("add this to that") or abstract/symbolically ("add everything labeled principal to everything labeled interest"). The abstract/symbolic capability means that product managers can write models that stand up to use in many different contexts.
An extensive range of mathematical functions for use in formulas(see below).
Intelligent/selective recalculation helps program performance.
The next chapter is the Optimization chapter (see FIG. 21). In this chapter the system is able to solve mathematical linear programs and other "search for best answer" problems. It also provides extensive tools for managing and seeing the effect of model constraints. This feature is very important as models get complex, and the number of constraints grows to, for example, several dozen. A deterministic, formula based model can be used as the basis for an optimizable model: starting with a deterministic model, the user can simply identify the objective and add constraints. In accordance with the invention, there is no need to write a separate, optimization-ready version of a model. The optimization chapter provides an overview of all optimization constraints and parameters in a case and defines the objective function for optimization. The system analyzes the optimization instructions and data contained in a model. It provides diagnostic status indicators for:
the mathematical type of optimization problem (e.g. linear, integer, non-linear, etc.);
the state of the constraints (satisfied or not satisfied). Thus, a hypothetically optimal solution can be hard-coded and compared against constraints, identifying those parts of the hypothetical solution that do not meet the constraints; and
the state of optimization (e.g. optimal, not optimal, infeasible, unbounded);
In addition, the system gathers all model constraints for viewing on one page. This is important because constraints are often of definitive concern in tax-motivated transactions. The system also sorts constraints by failing, binding, non-binding, and inactive. This helps negotiators identify the critical points in their deals, or helps a user figure out why his model might fail to provide an answer he would expect. It also provides detail results of the values, slack, shadow prices or failure margin of constraints. This information helps the user explain anomalous results, or suggest ways that financial objectives may be attained at less cost. Also provided is a simple algebraic list of all constraints, making it easier to make sure that no constraints have been mistakenly taken out or left in. This list can be printed, and becomes an important "output" for deal participants to examine and approve. The system also gathers all optimizable parameters, search parameters, and non-linear parameters for display separately on their own pages, helping make sure that the linear program model has been set up properly. It also automatically determines whether there are any parameters causing non-linearity and thus precluding being solved by the built-in linear optimizer The user can then more easily decide how to change the model to be solvable by the available optimizer. The system automatically traces the non-linear parameters to corresponding optimizable parameters and displays them with the non-linear parameter. This helps modelers find linear models that are approximate solutions to otherwise unsolvable nonlinear problems. The system also allows users to specify facets of optimization in a way that is intuitive and easy to understand. Constraints are expressed in terms of comparisons and not just formulas. Prior art systems treat formulas with constraints as one and the same making it difficult to discern between a formula that is incorrect and a formula which is correct but not satisfied in the model. Constraints are entered and evaluated separately from the associated formulas making it easy to see where the true problem lies. Results from the optimization software (e.g. CPLEX) are likewise translated back into these terms producing a result that users can easily interpret. It also provides button access to the optimizer. The system automatically converts the model to "optimizable" form for the optimizer, and then re-converts the optimizer's solution to code; thus, optimization is a transparent process to the user.
The GUI presents user with detailed progress screen and saves the results back to the user's file. The system also re-evaluates constraints in the context of the user's model to provide more useful feedback from optimization. This is important because the specific analytical assignment is often to reverse-engineer the set of constraints that produced a particular answer. The system also automatically invokes Successive Linear Programming (SLP) when needed to solve for a search parameter. This saves the user the labor of having to determine that the problem at hand is SLP and then perform the SLP by successively invoking the optimizer. It also automatically combines point-by-point searching and mathematical optimization, saving the user the labor of searching over various valid values of nonlinear data.
The next chapter is the Payment Organizer (see FIG. 23). The Payment Organizer shows all the payments a given party receives, or taxable income effects a party might recognize (contingent on the exercise or non-exercise of a particular set of decisions, if there are any). In short, this is the party-specific "bottom-line." It also provides user top-level control over payment stream classifications and summary report of all payments. The system calculates and summarizes the cash flows and taxable income effects of all instruments automatically. It also provides ability to add, delete, rename and reorganize (tree-like) all payment stream classifications. The system also provides the capability to filter payment streams according to party, outcome, or cash versus taxable income. It also provides capability to view payment stream summary according to any ad-hoc date stream specified by the user. Data can be summarized annually, monthly, daily, or even in combination (daily for the first couple years, annually thereafter). This is enormously difficult to do in a spreadsheet. Also, categories can be collapsed to show less detail, or expanded to show more detail. Categories can also be expanded to show individual payments contained in the category for auditing purposes. Subtotals can be shown on top of items totaled or below them, with a button-click. This makes reading the reports easier. The editor for the symbols is useable in symbolic-definition formulas (i.e., "CollectWhatever"). Additionally, the system provides standard financial statements (income, balance sheet, funds flow).
The next chapter is Reports (see FIG. 22). The Reports chapter provides the user with the ability to create, edit, view and print model data in reports that are useable as explanatory documents. Users do not have to load data into some other program for cosmetic improvements. A report can consist of several sections (each of which could otherwise be a freestanding report of its own, all arranged on a single report's page. The system provides the ability to create report "sections" (report parts), and provides the ability to drag and drop report sections on a layout editor to organize above/below and left/right arrangements of report sections. It also provides for push-button pivoting of individual sections of a report so that dates and/or labels can be shown vertically or horizontally. The system automatically creates headings for data rows/columns based on parameter names. The user can change these names. It also supports user-driven and automatic creation of nested super-headings (i.e., headings running across several columns). This makes reports more readable because it groups data into fewer, more easily understandable chunks, and helps the report reader find a particular column of interest more quickly. It also provides titles, headings, footnotes and control over data format. Reports can thus be "customer-ready" without having to be imported for clean-up into commercial word-processing or spreadsheet software. The system also supports the creation of sets of many reports to be printed or viewed. This is important because the "story" of a financial product often requires several related reports. It may optionally bind reports to user models (so that they are stored with the model), or to instrument definitions (so that they are stored with the instrument definition and thus available in every model in which such an instrument is used). Reports are language-independent: thus output can be in a language other than the system user's working language. The user does not have to speak the output language.
The next chapter is Template Builder. A "template" is a white-box piece of pre-built and pre-tested Smart Paper. A library of such templates provides a large part of the built-in financial knowledge that users can draw on. This makes it worthwhile for an organization to invest in well-constructed Smart Paper pieces that can be reliably shared. The GUI provides the ability to create Template definitions to be used for instantiation. Generally, only specially trained "builder/users" would invoke the Template Builder. It provides user access to protection controls over read/write specifications of parameters. It also allows the builder of templates to work in the same manner as in regular Smart Paper. Thus, they are familiar in appearance and do not require users to learn how separate components look and work. The system provides linkage to the currently active model so as to provide useful feedback to the builder. It also allows the builder to create, edit and delete template definitions, and to make these definitions available to the larger user community.
The next chapter is Instrument Builder. This chapter provides a special "build" mode for instrument builders to create the definitions of instruments. Instruments can be designed to, for example, calculate tax effects for numerous governments (U.S. states, foreign countries) simultaneously. Tax instruments can be designed to, for example, handle complex multinational tax interactions (foreign tax credits and the implications of various international tax treaties).
The next chapter or feature contains Main Menu Items. These items include an extensive, full-featured on-line "help" system which provides documentation for system features and behavior, and also provides financial examples which can serve as a tutorial; options for adjusting the program's appearance (horiz/vert tabs); and a program that follows the Windows NT "Control Panel" settings for cosmetics (dates, mouse clicks).
In addition to the above, there are some general features found in several of the chapters or components of the system described above. For example, print previews are provided for enabling the user see output before committing it to paper, thereby saving time, paper, and aggravation. In addition, general cosmetic formatting capability is provided which is similar to that found in commercially available word processing or spreadsheet programs.
Another chapter or feature of the invention provides the ability to manage multiple cases. A financial analyst may spend as much time managing and summarizing the cases he produces as he would spend producing the cases in the first place. The GUI also provides tree, containment, or list views of the files. It also provides an overlapping grouping capability, so files can be treated as a group in addition to individually. The system also provides a mechanism for extracting key results for several files and presenting them in a tabular report. It also provides file search capabilities based on the contents of the file in addition to the file's name, as well as filtering and sorting capability (e.g. show only my files). A "recent files" section and "all-files" section is provided. This is important because a great majority of the time users work on a single project continuously, and, with this feature, they don't have to look through hundreds of files to find one they were recently working on. The system intelligently identifies differences between two or more selected files, making it easier to explain their differences. It also provides capability to reorganize files (i.e. the tree), and the capability to read and add notes to files. Thus, a file's owner can protect the file from changes, while letting colleagues look at, and then attach notes to the file. In addition, the system provides detail records of file (e.g. ancestry). This is important because the great majority of files will probably not be created anew, but rather will be modified versions of existing files. The ability to track the changes that produced a file is a very advantageous and time-saving feature.
It is noted that not all of the "chapters" discussed above necessarily have a "Tab" always visible on the GUI. In other words, some of the chapters or features, i.e. Template Builder, are accessed through menu items or other suitable means for enabling the selection thereof.
Referring now more particularly to FIGS. 5-12, there is shown an example of the Payment Diagram chapter 50, having a graphical representation 52 of a simple financial scenario involving a two parties (54 and 56) and a "loan" instrument arrow 58
connected therebetween. In FIGS. 5-12 the two book view is used in order to more clearly explain the functionality of the invention. It is noted that, in FIGS. 5-12, the Payment Diagram chapter 50 has a reduced size so that greater information can be seen in the other chapters on the right side of the display.
In accordance with an important aspect of the invention, the Engine is operable, in response to creating of a graphical model, to automatically create useful information in certain of the other chapters. More particularly, in response to drawing an instrument in the Payment Diagram chapter, such as "loan" as shown in FIG. 5, the engine automatically generates time lines 62 in the Time Organizer chapter 60. This functionality is illustrated in the split screen view of FIG. 5, wherein the Payment Diagram 50 is shown on the left side of the display, while the Time Organizer 60 is shown on the right side of the display. The badged parameter in the instrument marks the most important cash flow which is displayed graphically in the Time Organizer. It is noted that the engine uses default data for generating the time lines of FIG. 5, and that the user can then edit the information, if necessary, to comply with the particular scenario being modeled.
Similarly, FIG. 6 shows an instrument calculation that is automatically generated in the instruments chapter 68 in response to drawing of the "Loan" instrument 58 in the Payment Diagram chapter 50. Default settings are also used for this canned loan instrument, but after it has been created, the user can modify the data in the instrument chapter as required to correspond with the particular scenario being modeled. Thus, by adding an instrument in the payment diagram 50 the engine automatically generates the instrument definition including related calculation in the instrument chapter 68. FIG. 7 shows the badged parameters in the instrument of FIG. 6. The box to arrow graphic on the left side of the instruments chapter, as shown in FIG. 7, indicates the important cash stream which shows up in the cash link in the payment organizer and in the time organizer link. The triangles and squares combined with the plus and minus signs (also on the left side of the instruments chapter) show the tax effect which shows up as the income in the payment organizer.
FIG. 8 shows the information automatically created in the constraints page of the optimization chapter 70 in response to drawing of the instrument shown in the instrument chapter 50. FIG. 9 shows another page, i.e. the optimizable parameter page
70a, of the optimization chapter 70 and the related information automatically generated by the engine in response to drawing of the "Loan" instrument.
FIG. 10 shows the information (cash) that is automatically generated by the engine in the payment organizer chapter 72 in response to drawing of the "loan" instrument in the payment organizer chapter 50. Similarly, FIG. 11 shows the (Income-tax effects) payment organizer view which is also automatically generated by the engine. The user can switch between the view in FIG. 10 and FIG. 11 by modifying the "Payment Type" in the pull-down menu at the top of the Payment Organizer chapter 72.
Finally, FIG. 12 shows the information that is automatically generated in the Reports chapter 74 in response to creation of the graphical party diagram in the payment diagram chapter 50 shown therein.
Of course, all of the information shown in FIGS. 5-12 is only exemplary, and is only based on the exemplary graphical representation shown in the payment diagram 50 which has the exemplary loan instrument. This information will, of course, vary depending on the particular instruments used with the tool and the particular application in which the invention is utilized.
EXAMPLE CASE
The following description provides an example of case or financial scenario modeled using the tool of the instant invention.
This exemplary case is called a QTE or Qualified Telecommunications Equipment case. A graphical representation of this exemplary financial scenario is shown in FIG. 13. The party LessorNameHere is the client or main focus of the deal and is called the lessor. The lessor wants the tax effects associated with owning QTE equipment. The party LesseeNameHere, called the lessee, currently owns the equipment and thus has the tax effects. The lessor proposes a deal to buy the asset and lease it back to the lessee thus acquiring the tax effects. The lessee still gets to use the equipment. To get the lessee to agree to the deal, a portion of the money used to buy the asset goes to the lessee as well. The tool is used, in this example, to model the deal from the perspective of the lessor. The company, FeeRecipients, known as the advisor, has been hired by the lessor to arrange the deal and thus the fee is paid to it. Likewise, only the lessor is shown to pay taxes because the deal is from their perspective. FIG. 7 provides a graphic representation of this exemplary financial scenario or deal. The diagram was created in using the tool of the present invention.
The following steps present a high level description of what is happening in this deal: 1) The lessor borrows money from the lender (LenderNameHere in the diagram) to buy the assets. 2) The lessor buys the assets from the lessee as indicated by the HardAsset and SoftAsset lines (the direction of the arrow indicates which way the money flows, not the asset). 3) The lessee pays rent to use the assets. 4) The lessor pays taxes during the deal. 5) The lessor pays a fee to the advisor for arranging the deal. 6) At the end of the lease, the lessor sells the assets to another party (Generic in the diagram). This is indicated by the residual line. 7) At some point in the middle of the deal, the lessee can buy the assets back and terminate the deal. This is illustrated by the PurchaseOp(EBO) line.
Step 1--Draw the Diagram as Shown in FIG. 13 in the Payment Diagram Chapter.
The first step in creating a case involves drawing the diagram shown in FIG. 13 using the Payment Diagram chapter 50 of the user interface. The basic steps for this involve adding the various parties to the diagram, as represented by boxes, and drawing financial instruments, as represented by directional arrows connecting the boxes. FIG. 14 shows the Payment Diagram interface used to create the diagram, and also shows the result of the first step executed in this example, wherein a first party
78 named "LenderNameHere" has been drawn in the Payment Diagram chapter 50 The white area of FIG. 14 is the drawing area where the diagram of the deal is created. The tools above the drawing area are used to create and view the diagram. For example, the magnifying glasses allow the user to zoom in and out.
This image also shows the general interface for the product. It is noted that not all figures herein show the full interface of the full chapter. In other words, some of the figures only show an enlarged partial view of the interface or chapter. The tabs 76 on the left side of the screen are used to navigate around the program to the different interfaces or "chapters" of the user interface. Each major step in creating a deal is represented by a chapter. The icons under the menu bar are general purpose tools used, for example, to save a case to a hard disk or load a new case.
To do this first step, the user clicks the party tool (the round box with a plus sign) and then clicks in the drawing area where he wishes to locate the party. He can then select from a list of predefined parties or enter his own.
When the user adds a new box to the party diagram, such as party 78, there is no specific action in the engine, except for the possible generation of a party object in the Parties Chapter. If this is a party that does not appear anywhere else in the payment diagram, then the engine adds a new section to the Parties chapter with two parameters which the user can then edit and augment. The two parameters represent, for example, the first month of that party's fiscal year, and the name of his tax counsel. This data is reflected in engine parameters to provide persistence to the data, and to make the data available to instruments which will be connected to this party.
Referring now to FIG. 15, after adding a two or more parties 78, the user can then begin to add financial instruments 80. The user does this by clicking on the first party( the one who will be making payments), and dragging a line to the second party (the one who will be receiving the payments). The arrow indicates the direction the payments flow. FIG. 15 shows this next step with two parties and a single loan instrument. When considering the arrows of an instrument line, the loan is a misnomer because payments or money flows in two directions. The borrower receives the loan and then makes payments back. However, the convention used by this embodiment of the program is to show only the direction in which the loan is paid back.
When the user draws an instrument 80 on the Payment Diagram, the application creates a representative object in the engine to calculate and generate the calculations and cash flows for that instrument. More specifically, the client application tells the engine General Registry to create a new instrument object, which initially is an empty shell. The client application reads in from a data file the representation of the instrument that has been saved by the instrument designer, and splits this up into graphic and engine data and passes the engine part to the new Instrument object. The engine then reconstructs the instrument from this data; this includes a hierarchy of parameters and parameter lists, a couple of instrument party objects, and a default instrument handler. Each instrument party contains the role information needed to create the cash and tax implications for the party at one end of the instrument arrow. The default instrument handler contains the information needed on whether and how to truncate the flows in non-base outcomes. Each parameter's formula is parsed into its expression objects, and named references are registered with the general registry's name reference manager, which, if possible, resolves them, so that the parameter's values can be calculated when needed. As these references are resolved, links are made between the parameters' dependency managers so that changes are correctly propagated through the entire system. For each decision that the user has created in the time organizer, the engine creates an instrument handler containing the information on whether and how to truncate the flows for outcomes containing that decision. Each handler starts as a simple copy of the default handler, but can be changed by the user. The client tells the engine instrument object the names of the parties at each end of the arrow. The engine then looks in the parties data to find a section of data for that party, which it then uses to complete the instrument party role information (e.g. date of fiscal year end). The engine instrument synchronizer object then springs into action, generating the actual flow parameters for each party and outcome. The instrument party information is used to determine which parameters contain the cash and tax flows for that party. For non-base outcomes, the synchronizer searches for the first decision that terminates the flow, according to the instrument handlers. It then generates a truncating parameter (if necessary), and a final parameter which it identifies to the internal database by attaching badges indicating the party, cash or income classification, outcome, instrument name, other party and tax authority (for income flows). The engine internal database recognizes these new badged parameters and changes any collected data in (for example) yield calculation templates to update their values. This process also enables the payment organizer to update its display to show the new instrument.
The user continues to add parties and instruments until the deal is modeled fully as shown in FIG. 13.
Step 2--Define the Dates
Dates and timelines are defined in the Time Organizer as depicted in FIG. 16. In the top portion 82 of this chapter, the user defines single case dates known as Key Dates. The user clicks the add date tool (the calendar with a plus sign) and then enters a name for the date as well as the actual date. Similar to parties, the dates are stored in the engine and can be referenced by other parts of the case. The other tools next to the add date tool are used to modify the dates including changing or deleting a date.
In the bottom section 84 of the interface, the user defines the overall deal dates called the EventDates. This sets the basic start and end of a deal anrd also the periodicity (annual, quarterly). The user changes the EventDates by right clicking on the line and selecting "Edit timeline" from the menu. The other lines are for visual purposes only. All key dates defined in the deal are shown. Each primary cash flow for an instrument is represented by a line in the time organizer. Badging information stored within the engine for each instrument defines which is the primary cash flow for that instrument.
For this exemplary deal, the following changes are defined in the Time Organizer: Closing: Dec. 30, 1998--the date the deal closes and all the transactions begin (every deal has a closing date) EBO: Jan. 2, 2011--the date the lessee can option to purchase the assets back (EBO stands for early buy out) Residual: Dec. 30, 2014--the date the lease ends EventDates: from the Closing to the Residual--the main deal time line starts at the closing and continues annually until the residual date
Once the EBO date is defined, it is turned into a "decision" by the engine, which means the deal splits in to two possible courses or "outcomes". The normal case, or BaseOutcome, means the deal comes to term and the assets are just sold to the market place. The EBO outcome occurs when the lessee purchases the assets prior to the end of the deal. For the purpose of financial analysis, all outcomes can be fully modeled to get the deal approved by the client. The outcome tool, the triangle with a plus sign (currently disabled in FIG. 16), is used to define an outcome.
When the user adds an outcome to the time organizer chapter, the engine performs numerous functions. More particularly, the engine creates a new outcome object to house data specific to this outcome, with links to the decision objects which comprise the outcome. For each tax-like instrument (for which the instrument designer has specified a "fresh copy for each outcome"), a complete copy of its parameter, party and classification data is generated. For each instrument, the instrument synchronizer generates new terminating parameters as necessary. These parameters terminate the flows generated by this instrument at the first decision contained in the new outcome that has been designated by the user as a terminating decision in the instrument's decision handlers. For each instrument, the instrument synchronizer generates new badged parameters to identify the flows to the internal database. These parameters take their value from the terminating parameters defined in the previous section (or the original parameters if not terminated), with possibly a sign change. They are given badges based on the data in the party and classification sections of the instrument; the categories are Party, Outcome, Cash or Income Classification, Other Party, Instrument Name and (for income classifications) Tax Authority. When the internal database receives the information about the new badged parameters, it signals all effected collector parameters that a change has occurred. These are parameters which have been designated as extraction parameters, or as formula parameters using one of the special "collect" functions. The next time that their values are requested, they will re-establish all links with badged parameters so that the new ones are included. The collector parameters signal a value change via their dependency managers to tell all other parameters whose value depends on theirs that a change has occurred. In this way the flows generated by the new outcome spread their effect throughout the model.
FIG. 17 graphically shows the decisions and outcomes which result from the early buy-out (EBO) option in this example.
Step 3--Entering Instrument Data
Once the diagram is created and the dates are defined, the user next fills in all the data and calculations necessary to complete the deal. The first part of this is filling in instrument data. Instrument data is entered in the Instruments chapter as seen in FIG. 18. FIG. 18 shows the Calculations section of an instrument where data, such as the rate of a loan or cost of an asset, and calculations, such as the amortization of a loan or depreciation of an asset, are entered.
The first two tabs near the top of the figure and next to the "Calculations" tab are used to enter role information for each party associated with an instrument (as defined by the payment diagram explained earlier). In FIG. 18, the Borrower tab can be seen where information about the party borrowing the money for the loan is modified such as how the loan interest is deducted. Lender information is modified by selecting the next tab. The Event handlers tab contains the settings for how the instrument is processed if a different outcome is used. For example, loans are generally paid off if a deal ends early. The Reports tab lists the reports specific to the instrument, such as the loan payments.
Starting with the loan instrument, the only item which needs to change is the loan rate. The other default or initial values for the instrument are sufficient for how the loan should be setup in this deal. Money is borrowed at a fixed rate of
5.0625%. The steps are as follows: 1) Double click on the current value for the loan rate (this is the Rate parameter in the Calculations section of the Loan instrument); and 2) Change the value from the default value to 5.0625%. (See FIG. 19). It is noted that the formula includes additional syntax that indicates how the Rate parameter is to be used throughout the model.
When the user changes the Rate formula in the user interface, the engine will record the new formula for that parameter, parse it into its expression objects, and transmit a valuechanged message through the network of dependency managers for parameters whose values depend on this parameter. Each of these parameters will then know to recalculate its value when it is next requested.
To complete the instrument changes, data will need to be entered for several other instruments. Instrument data generally falls into two categories. It is either a fixed part of a deal such as the cost of an asset or the interest rate of a loan. Or it is an optimized value that gets calculated when the optimal solution is found. The instruments in this case are set up in the following way:
Fixed Data: HardAsset--$700,00. The cost of the asset which is generally a given in the deal SoftAsset--$300,00. The cost of the asset which is generally a given in the deal Fee--This is 1% of the assets purchased and is negotiated with the client or lessor. Residual--For this example, the residual is actually fixed at 20% of the cost of the assets.
Variable or Optimized Data: Loan--The loan payments or debt service are optimized to satisfy the deal (see the optimization step). Rents--The rent payments are likewise optimized to satisfy the deal. PurchaseOp(EBO)--The purchase option payments which are used when the EBO is exercised are optimized as part of the deal.
No changes are needed in the Taxes instrument since this is based on the standard federal tax rate. Step 4--Building Smart Paper
Any data or calculation not specified as date or in the instruments is entered in Smart Paper. Smart Paper is a calculation based feature very similar to a enhanced spreadsheet (more details on Smart Paper are provided below). However, while a spreadsheet is based on individual cells linked together strictly by formulas, Smart Paper formulas know about each other and about links to dates. More particularly, as explained above, Smart Paper is a non-cell based calculation interface where references are based on a hierarchical outline as opposed to a positional reference. The linking information is stored in the engine. For example, one formula may contain a set of values linked to the first date of every year for 20 years. A second formula may only need the value from a specific date, such as the fifth date, within the first formula. The second formula need only specify the specific date and the engine will search out the most appropriate value.
The Smart Paper in this deal is built up in two ways. First, the user has a variety of templates he can add that perform pre-defined calculations. Second, the user can create custom calculations or enter custom data into Smart Paper. FIG. 20
shows the interface for creating Smart Paper. The main screen with all the data and calculations is where the user creates his outline of data and calculations. The tools along the top are used to change the view of Smart Paper and to operate on specific entries in the outline.
Each tab is a different sheet of Smart Paper where the user can create his outline and enter his data and calculations. When the user adds a piece of Smart Paper, the engine creates a worksheet in the General Registry. As the user creates Headings and Parameters in the piece of Smart Paper, the engine creates mirroring Parameter Lists and Parameters. When a Parameter is created and named, the engine registers it with the name reference manager. This will attempt to resolve any outstanding references to this name by formulas in other parameters. It will also see if references to other parameters of the same name need to be more fully qualified to prevent ambiguities. When a reference to this parameter is resolved, the referencing parameter sets up a link between its dependency manager and that of the new parameters, so that any changes in value of this parameter will be signaled to the referencing parameter.
When the user specifies the formula for the new parameter, the engine parses it into its basic expression nodes. Any references to other parameters are registered with the name reference manager which will attempt to resolve it immediately. If it cannot be resolved immediately, then the name reference manager keeps the request as pending, in case it can be later resolved. Any resolved reference causes links to be set up between the dependency managers as described above.
As the user enters parameters into Smart Paper, the values of these parameters are immediately displayed. It does this by asking the engine to calculate the parameter's value, which triggers an evaluation of the parsed expression nodes. These nodes do the basic arithmetic operations, references to other parameters and evaluation of functions. The value returned can be either a scalar or some sort of array. Scalars are single quantities like numbers, dates, frequencies, elapsed times, character strings. Arrays are lists of these scalars.
In FIG. 20, we see that the user has set up five sheets of Smart Paper. The first one contains all the IRS related calculations which become important when optimizing the deal. A fully optimized deal has certain legal requirements it must meet. The next one calculates the present value benefit of the deal for the lessee. In fact, the entire purpose of this deal is to maximize the present value benefit. The next two sheets calculate the lessor's MISF yield for the EBO and BaseOutcomes. And the last sheet just has a general collection of data used throughout the deal. All parts of Smart Paper except the general section are created using pre-defined templates.
Step 5--Optimizing the Deal
Optimization is the process of imposing constraints or requirements on a case and the varying values and other parts of the case until the best result is found. By a constraint, it is meant, for example, that some cases fall under certain restrictions from, for example, tax laws relating to leasing and rents which must be satisfied if the case involves a lease or rents. The elements of a case that can be varied are called optimizable parameters.
In this deal, we are maximizing the present value benefit to the lessee. The following constraints exist on this deal and must be satisfied when optimizing to the best result: IRS tests for profit, EBO compulsion, minimum investments and uneven rents Rent payments must be greater than 0 Loan payments and the loan balance must always be greater than 0 Loan payments must be less than rents received EBO payments must be less than the taxes paid by the lessor The loan amount must be less than or equal to 80% of the asset cost Standard constraints on the calculation of a MISF yield for both the BaseOutcome and the EBO outcome
The following parameters are then varied to reach the optimal deal: The loan payments The rent payments The purchase option payments MISF minimum investment balance
The optimization screen is divided into several pages by the tab across the top of the screen, as shown in FIG. 21. The "Constraints" tab which is selected and shown in FIG. 21 shows those aspects of the deal which can't change or must be satisfied. These constraints are added to parameters spread throughout the instruments and sheets of Smart Paper. The engine collects these and displays them in a precise form for the user to view and evaluate. The Optimizable Parameters tab lists those items which can change. The other tabs provide other relevant information to help the user evaluate his model. The Objective Function shows what is being optimized and whether a maximum or minimum value is sought. The user simply clicks the Optimize button near the top of the screen to start an optimization.
When the user hits the optimize button, the engine analyzes all the parameter definitions and constraints that the user has entered, and tries to set up a linear (or mixed integer) programming representation of these suitable to be sent to the CPLEX linear optimizer. Assuming that this can be done, it sends the model to CPLEX, gets the results back and puts the resulting values for optimizable parameters back into their formulas.
Step 6--Viewing Output
The final step is viewing the data either in the reports chapter or in the payment organizer. A report from the reports chapter is displayed in FIG. 22. The tools are provided to allow the user to view different aspects of the report including zooming in and out or printing the report.
The data for a report is collected directly from Smart Paper and instruments. The only function the reports chapter performs is formatting the data for professional output. Likewise, the Payment Organizer chapter, allows the user to view the data and cash flows according to a specific party, outcome and time frame within the deal. This again is only a viewing interface which collects data directly from the data and calculations entered in other parts of the model. The Payment Organizer interface is displayed in FIG. 23. FIG. 23 shows the annual cash flows for the lessor party from the base outcome of the deal. The user changes the view by manipulating the various controls provided at the top of the screen.
As can be seen from the example case above, the user can model a financial scenario easily and quickly using the tool of the present invention.
SMART PAPER EXAMPLES
The following are examples demonstrating the functionality of the worksheet section or Smart Paper feature of the instant invention.
Smart Paper is a non-cell based calculation interface where references are based on a hierarchical outline as opposed to a positional reference. FIGS. 24 and 25 show a simple, example piece of Smart Paper created in accordance with the instant invention, and demonstrates some of the benefits of the non-cell based formulas used therein.
The smart paper example of FIGS. 24 and 25 show a portfolio of airplane rents. Under the heading Aircraft, we see rents for Plane1 and Plane2. The rents for each aircraft are paid on different dates and for different amounts. The Totals section sums all the dates that the rents are paid on and shows the rents paid on each date. In a sense, this acts as a summary table. The AnnualTotals section refers directly to the Totals section but uses an annual date stream as opposed to the dates each rent is paid. This effectively shows the viewer how much rent is paid each year regardless of the specific day that rent is paid.
FIG. 24 shows the values or results of the formulas created in Smart Paper, while FIG. 25 shows the corresponding (or hidden) formulas used to obtain the values in FIG. 24. It is noted that the actual rents are just dummy values used for illustration purposes. The two functions used in this example are Subtotal and Union (see description of Formula Language below). Union collects a bunch of date streams and combines them into one. Subtotal searches all the parameters underneath a heading and collects values from all the parameters with the same name as specified for the function.
From this example, we see some of the benefits of the non-cell based worksheet of the instant invention. For example, if another plane is added under the heading Aircraft, and the rent stream is called Rents, then the TotalRents parameter will always show the total of all rents, because the Subtotal function finds all parameters named Rents under the Aircraft heading. Likewise, if a rent payment is added to any of the existing Rents parameters, TotalRents is automatically updated. In a conventional spreadsheet, solving these two problems would ultimately involve inserting cells or rows or columns and updating formulas that sum the data. The hierarchical nature of the outline, made possible by Smart Paper, lets the same name be used more than once in the manner indicated above. As a result, a very convenient, flexible and powerful calculation interface is provided by the Smart Paper chapter of the instant invention.
This example also demonstrates the advantage of the dynamic non-cell based formulas used in Smart Paper. For example, the AnnualTotals collects all the rents paid for each year. In a spreadsheet, the user would have to examine each rent stream and individually select which rent payments fall in each year. If the Annual table then needed to be changed to quarterly, the user would have to go back and re-do the entire process from scratch. However, with the non-cell based worksheet of the instant invention, formulas know how to link values to dates so that the final formula can interpret the input values based on the actual date rather than the position the date falls in a spreadsheet, which relies on positional references rather than the hierarchical references of the instant invention.
Similar to the AnnualTotals, the TotalDates parameter benefits from non-cell based references if a new date is entered for any rent stream. The TotalDates will always collect all rent dates regardless of how many or few there are.
A second smart paper example is shown in FIGS. 26 and 27. This example relates to a simple loan structure in which calculations of the loan amount and its amortization is based on a present value (PV) factor and a fixed debit service. FIG. 26
shows the actual values in this smart paper example, while FIG. 27 shows the underlying formulas used to calculate the values. The following table explains the particular headings, parameters and formulas used in the example of FIGS. 26 and 27.
SIMPLE LOAN EXAMPLE
Heading/ Parameter Details Inputs.Scalars Cost Amount on which loan will be based (i.e., the cost of an asset) Calendar Calendar day-counting method to use in the calculations that follow. Refers to Time Organizer default calendar setting. Inputs.Rate- Schedule RateDates Dates that interest rates are set and the periods to which those rates apply. First and Last links the first and last dates of the current schedule with those of another schedule, which in this instance is the PaymentDates index in the Inputs.Payments section. Rate Interest rates indexed to RateDates Table means a given value applies to every day in its period. For uses a repetition value to map the same value to a certain number of periods. The semicolon (;) symbol stops the current sequence of values. Thereafter maps the last given value to remaining index dates. Inputs.- Payments PaymentDates Dates of payment and the periods to which those payments apply. StartDates: recognizes the dates that follow as first days of periods. InputAmounts Debt service paid, based on asset cost and number of periods. COUNT determines the number of elements in an array. Therefore, Cost/COUNT (PaymentDates) is 1,000,000 divided by 11. Thereafter maps the given value to each remaining period. Amortization AmortDates Dates of debt service calculations and the periods to which those numbers apply. ActsLike ensures that any change in the PaymentDates prefix or dates is automatically passed on to the current parameter. Principal Applied to balance after interest is paid. Interest Interest due for each period, paid in arrears. Arrears applies each amount to the period that precedes the index date. Previous defines an array in which each value refers (relative to its position on the index) to the value of the argued parameter in the preceding period. For example, Interest 30,036.66 on Jul. 01, 2000 refers to Balance 730,064.69 on Jan. 01, 2000. PeriodInterval returns the length in years of a period on the current date index. The length is .5 due to the semiannual dates of the AmortDates index. The offset of -1 instructs the application to use the previous period for its calculation, since interest is paid in arrears. DebtService Direct reference. Balance Remainder after payment of principal. Previous defines an array in which each value refers (relative to its position on the index) to the value of the argued parameter in the preceding period. The second argument for the Previous function tells the application to return the value of the LoanAmount parameter to the first period. Thereafter, each new balance is reduced by principal paid during the current period. PVFactor Constructs a PV curve. For Previous, refer to Balance parameter detail. For PeriodInterval, refer to Interest parameter detail. Result LoanAmount Loan amount based on the PV of the total Debt Service payments. SUM returns the total of all its arguments; i.e., the sum of the products of all debt service payments and the corresponding PV factors.
A third smart paper example is shown in FIGS. 28 and 29. This third example illustrates ways in which smart paper can be used to determine the nominal daily present value (PV) and investor rate of return (IRR) for all pre-tax and after-tax cash flows with respect to an investment. Again, FIG. 28 shows the actual values, while FIG. 29 shows the underlying formulas used to calculate the values. The following table explains the particular headings, parameters and formulas used in the example of FIGS. 28 and 29.
PRESENT VALUE AND IRR EXAMPLE
Heading/ Parameter Details Inputs Investor Name of party whose investment is to be analyzed. Selected list member from category "Party". Calendar Day-counting method to use in calculations on this sheet of Smart Paper. Selected list member from category "Calendar". CashFlow.sub.-- Summary Project_Dates Dates returns the dates of flows found by the CollectPayments function. CollectPayments identifies all payment flows classified as AfterTaxCash for the Investor parameter. Investor_PTCF Identifies payment flows classified as PreTaxCash for the Investor party. Investor_Taxes Identifies payment flows classified as Taxes for the Investor party. Investor_ATCF Identifies payment flows classified as AfterTaxCash for the Investor party. IRR_Calculation FirstIRRDate MonthEndOf returns the last calendar day of a month defined by the First, Dates, and CollectPayments functions. One month is subtracted from the result. First(Dates(CollectPayments . . . )) finds the first date among the dates of all payment flows classified as AfterTaxCash for the Investor party. LastIRRDate As above, except the month for the MonthEndOf function is defined as the Last of all dates for payment flows classified as AfterTaxCash for the Investor party. IRRDates Starting and Ending refer to the dates defined above to specify the First and Last dates for date stream. Monthly specifies that dates continue monthly from the first date in the stream. InvestmentBalance Cumulative returns the accumulation of all Investor_ATCF values up to each period. The cumulative Earnings values are added to the result. Earnings Arrears recognizes that each value occurs in arrears. For example, the value on Mar. 31, 1999 applies to the period that began Feb. 28, 1999. Previous defines an array in which each value refers to the product of InvestmentBalance in the preceding period multiplied by 13.6156% (NominalIRR_UsingSearch) times the PeriodInterval for the previous period. PeriodInterval returns the length in years of a period. With monthly dates and a US_30_360 calendar, the length is 0.083 . . . PV Calculation PVRate_Effective NoIndex: recognizes the value that follows as a scalar, i.e., a single value that is independent of the current date index. PVRate_Nominal As above. The formula that follows converts an annual rate into a nominal rate. PV_Dates Starting and Ending refer to names of key dates in Time Organizer to define the respective first and last dates in the date stream, with monthly dates in between. PVFactor Semicolon(;) stops the current stream. In the subsequent stream: For its first value, Previous divides 1 (the value of the preceding period) by the sum of 1 + 9.5690% times the period interval value. See PeriodInterval in IRR_Calculation.Earnings above. Thereafter, Previous uses the result of the preceding period in the calculation for the current period. Base_PTCF Simple reference. Discounted_PTCF Simple arithmetic. Base_ATCF Simple reference. Discounted_ATCF Simple arithmetic. PV_Summary PVofPTCF.sub.-- Daily_Present_Value uses the value of UsingFunction PVRate_Nominal to calculate the daily present value of Base_PTCF (the base pre-tax cash flow) as of the Closing date. Closing is not defined on this sheet; it refers to a key date in Time Organizer. The function uses the Inputs.Calendar setting for the day-counting metrics. PVofPTCF.sub.-- Sum returns the sum of all values in the UsingSP Discounted_ATCF parameter. The result is the same as the result of the Daily_Present_Value function as argued above. PVofATCF.sub.-- See PVofPTCF_UsingFunction above. UsingFunction PvofATCF.sub.-- See PVofPTCF_UsingSP. UsingSP IRR_Summary NominalIRR.sub.-- Search performs iterative calculations until it finds UsingSearch a nominal IRR rate between 10% and 200% that makes the last investment balance equal to the target value of 0. The search increment accuracy is le.sup.-8. NominalIRR Monthly_IRR calculates the nominal monthly UsingFunction investor rate of return using the dates and values of the Investor_ATCF parameter. The result is the same as the search iteration method as argued above. EffectiveIRR Simple arithmetic to convert the nominal IRR to an annual IRR.
As can be seen from the examples above, the Smart Paper feature of the instant invention provides a very useful calculation interface and tool. It is noted that the Smart Paper tool can, in accordance with the instant invention, be used independently from the modeling and analysis tool of the instant invention as an improvement to spreadsheet applications.
The Engine
As explained above, the graphical user interface and the engine provide an intelligent interface which enables data to be generated which models the deal in response to graphical modeling of the deal by the user. Thus, the graphical model not only provides a visual representation of the deal, but it also causes the engine to generate useful information which at least partially model the deal based on the information the engine is able to obtain from actions performed by the user during creation of the graphical model of the deal.
In the preferred embodiment of the instant invention, the engine operates in accordance with the description below. More particularly, the engine is a computational server designed to support client applications wanting spreadsheet-like formula evaluation, manipulation of indexed streams of quantities and linear and mixed integer programming optimization. The engine has the following main features:
The engine is designed as a COM server which can be initiated either in-process or out-of-process. In the latter case, it can be either local or remote, and can handle multiple clients.
The engine has a hierarchical organization of data; at the topmost level the predefined general registry can contain multiple worksheets and instruments;