Package org.drip.execution.impact

Class TransactionFunction

java.lang.Object

org.drip.function.definition.R1ToR1

org.drip.execution.impact.TransactionFunction

Direct Known Subclasses:

TransactionFunctionLinear, TransactionFunctionPower

public abstract class TransactionFunction
extends R1ToR1

TransactionFunction exports the Temporary/Permanent Market Impact Displacement/Volatility Functional Dependence on the Trade Rate. The References are:

• Almgren, R., and N. Chriss (1999): Value under Liquidation Risk 12 (12)
• Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions Journal of Risk 3 (2) 5-39
• Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs Journal of Financial Markets 1 1-50
• Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional Trades Journal of Finance 50 1147-1174
• Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange Analysis of Institutional Equity Trades Journal of Financial Economics 46 265-292

• Module = Product Core Module
• Library = Transaction Cost Analytics
• Project = Optimal Impact/Capture Based Trading Trajectories - Deterministic, Stochastic, Static, and Dynamic
• Package = Market Impact Transaction Function Implementation

Author:

Lakshmi Krishnamurthy

Method Summary

Modifier and Type	Method	Description
double	crossHoldingsDerivative(double dblTradeAmount, double dblTradeInterval)	Compute the Second Order Sensitivity to the Left/Right Holdings
double	evaluate(double dblTradeAmount, double dblTradeInterval)	Evaluate the Impact Function at the specified Trade Parameters
double	leftHoldingsDerivative(double dblTradeAmount, double dblTradeInterval, int iOrder)	Compute the Sensitivity to the Left Holdings
abstract double	modulate(double dblTradeInterval)	Modulate/Scale the Impact Output
abstract double	regularize(double dblTradeInterval)	Regularize the Input Function using the specified Trade Inputs
double	rightHoldingsDerivative(double dblTradeAmount, double dblTradeInterval, int iOrder)	Compute the Sensitivity to the Right Holdings

Methods inherited from class org.drip.function.definition.R1ToR1

antiDerivative, derivative, differential, differential, evaluate, integrate, maxima, maxima, minima, minima, poleResidue

Methods inherited from class java.lang.Object

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

Method Details

regularize

public abstract double regularize(double dblTradeInterval)
                           throws java.lang.Exception

Regularize the Input Function using the specified Trade Inputs

Parameters:

dblTradeInterval - The Trade Interval

Returns:

The Regularize Input

Throws:

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

modulate

public abstract double modulate(double dblTradeInterval)
                         throws java.lang.Exception

Modulate/Scale the Impact Output

Parameters:

dblTradeInterval - The Trade Interval

Returns:

The Modulated Output

Throws:

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

evaluate

public double evaluate(double dblTradeAmount,
double dblTradeInterval)
                throws java.lang.Exception

Evaluate the Impact Function at the specified Trade Parameters

Parameters:

dblTradeAmount - The Trade Amount

dblTradeInterval - The Trade Interval

Returns:

The Value of the Impact Function

Throws:

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

leftHoldingsDerivative

public double leftHoldingsDerivative(double dblTradeAmount,
double dblTradeInterval,
int iOrder)
                              throws java.lang.Exception

Compute the Sensitivity to the Left Holdings

Parameters:

dblTradeAmount - The Trade Amount

dblTradeInterval - The Trade Interval

iOrder - Order of the Derivative

Returns:

The Sensitivity to the Left Holdings of the Impact Function

Throws:

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

rightHoldingsDerivative

public double rightHoldingsDerivative(double dblTradeAmount,
double dblTradeInterval,
int iOrder)
                               throws java.lang.Exception

Compute the Sensitivity to the Right Holdings

Parameters:

dblTradeAmount - The Trade Amount

dblTradeInterval - The Trade Interval

iOrder - Order of the Derivative

Returns:

The Sensitivity to the Right Holdings of the Impact Function

Throws:

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

crossHoldingsDerivative

public double crossHoldingsDerivative(double dblTradeAmount,
double dblTradeInterval)
                               throws java.lang.Exception

Compute the Second Order Sensitivity to the Left/Right Holdings

Parameters:

dblTradeAmount - The Trade Amount

dblTradeInterval - The Trade Interval

Returns:

The Second Order Sensitivity to the Left/Right Holdings of the Impact Function

Throws:

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