org.drip.execution.hjb

Class NonDimensionalCostEvolverCorrelated

java.lang.Object

org.drip.execution.hjb.NonDimensionalCostEvolver

org.drip.execution.hjb.NonDimensionalCostEvolverCorrelated

public class NonDimensionalCostEvolverCorrelated
extends NonDimensionalCostEvolver

NonDimensionalCostEvolverCorrelated implements the Correlated HJB-based Single Step Optimal Trajectory Cost Step Evolver using the Correlated Coordinated Variation Version of the Stochastic Volatility and the Transaction Function arising from the Realization of the Market State Variable as described in the "Trading Time" Model. The References are: - Almgren, R. F., and N. Chriss (2000): Optimal Execution of Portfolio Transactions, Journal of Risk 3 (2) 5-39. - Almgren, R. F. (2009): Optimal Trading in a Dynamic Market https://www.math.nyu.edu/financial_mathematics/content/02_financial/2009-2.pdf. - Almgren, R. F. (2012): Optimal Trading with Stochastic Liquidity and Volatility, SIAM Journal of Financial Mathematics 3 (1) 163-181. - Geman, H., D. B. Madan, and M. Yor (2001): Time Changes for Levy Processes, Mathematical Finance 11 (1) 79-96. - Jones, C. M., G. Kaul, and M. L. Lipson (1994): Transactions, Volume, and Volatility, Review of Financial Studies 7 (4) 631-651.

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor and Description
NonDimensionalCostEvolverCorrelated(OrnsteinUhlenbeckProcess2D oup2D, double dblAsymptoticEulerUrgencyThreshold, boolean bAsymptoticEnhancedEulerCorrection) NonDimensionalCostEvolverCorrelated Constructor

Method Summary

Modifier and Type	Method and Description
NonDimensionalCost	evolve(NonDimensionalCost ndc, MarketState ms, double dblNonDimensionalRiskAversion, double dblNonDimensionalTime, double dblNonDimensionalTimeIncrement) Evolve a Single Time Step of the Optimal Trajectory

Methods inherited from class org.drip.execution.hjb.NonDimensionalCostEvolver

asymptoticEnhancedEulerCorrection, asymptoticEulerUrgencyThreshold, ornsteinUnlenbeckProcess

Methods inherited from class java.lang.Object

equals, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

NonDimensionalCostEvolverCorrelated

public NonDimensionalCostEvolverCorrelated(OrnsteinUhlenbeckProcess2D oup2D,
                                           double dblAsymptoticEulerUrgencyThreshold,
                                           boolean bAsymptoticEnhancedEulerCorrection)
                                    throws java.lang.Exception

NonDimensionalCostEvolverCorrelated Constructor

Parameters:

oup2D - The 2D Ornstein-Unlenbeck Generator Process

bAsymptoticEnhancedEulerCorrection - Asymptotic Enhanced Euler Correction Application Flag

dblAsymptoticEulerUrgencyThreshold - The Asymptotic Euler Urgency Threshold

Throws:

java.lang.Exception - Thrown if the Inputs are Invalid

Method Detail

evolve

public NonDimensionalCost evolve(NonDimensionalCost ndc,
                                 MarketState ms,
                                 double dblNonDimensionalRiskAversion,
                                 double dblNonDimensionalTime,
                                 double dblNonDimensionalTimeIncrement)

Description copied from class: NonDimensionalCostEvolver

Evolve a Single Time Step of the Optimal Trajectory

Specified by:

evolve in class NonDimensionalCostEvolver

Parameters:

ndc - The Initial Non Dimensional Cost Value Function

ms - The Market State

dblNonDimensionalRiskAversion - The Non Dimensional Risk Aversion Parameter

dblNonDimensionalTime - The Non Dimensional Time Node

dblNonDimensionalTimeIncrement - The Non Dimensional Time Increment

Returns:

The Post Evolved Non-dimensional Cost Value Function