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Ryan Nauman
VP, Product and Market Strategist
Stephen Berei
VP, Client Services & Implementation
Jeremy Poulin
Senior Client Consultant

8.2: Practical Uses of the New Features

Mar 15, 2012 Stephen Berei
It’s always exciting for us to release new versions of our programs because it gives us the opportunity to unveil what our development team has been working on over the past several months or longer. We strive to include additional features in our products that we not only believe are useful and practical for our clients as well as (and most importantly) features that our clients specifically request.

The big question is always what are the new features, but maybe the more significant and intriguing question is how can they be useful or practical.
 

StyleADVISOR:

REPORT VIEW UNDO
The practicality of this is short and sweet. If you make a mistake in Report View, you now have the option to UNDO. It’s exciting and for the most part an extreme time saver and, as we all know, time is money. Right?
 

AllocationADVISOR:

CAPITAL ALLOCATION LINE
What is the Capital Allocation Line? The CAL is the line created that shows all possible combinations of risky and risk-free assets. In other words, this is where the maximum Sharpe Ratio is generated. AllocationADVISOR gives us the ability to build the Efficient Frontier, but this may not include a risk-free asset. Therefore, this new option is notable because it allows us to include the risk-free asset within the overall portfolio and determine the best possible CAL; in turn, the optimal portfolio at tangency. Below shows a picture of this in AA.
 
 
APPLYING ADJUSTABLE RATES OF INFLATION TO CASH FLOWS
It’s pretty clear that inflation rates can be fixed or can vary over time. Previously in the program the inflation rate chosen was fixed not only for the overall rate, but also for the cash flows. We’ve since then included the ability to project an overall rate of inflation, but we also have the ability to set independent rates of inflation for specific cash flows. That’s what we’ll talk about here.
 
For example, let’s use Tuition and Health Care. These two categories could have separate inflation rates. Because of this, it makes sense for us to use the inflation rate that is most representative of its respective category. We’ll use a rate of 8.0% for Tuition and 7.0% for Health Care. Now, once again we come back to the question, are these rates fixed?  Possibly, but not necessarily; to support this case we’ve added the ability not only to use different rates over time, but also interpolate those rates. Below shows a picture of the categories and flows with different inflation rates in AA.
 
 
What added value does this give us when using the program? It allows us to provide more of a real world application to the model. As mentioned inflation rates can/do change over time and this feature gives us the ability to tailor the inputs towards individual clients and develop more realistic final output.
 
I’ve discussed a few of the new features included in our latest version 8.2, but feel free to visit and view the SA and AA Guides to New Features for all new functionality.


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