Package org.drip.execution.principal

Class Almgren2003Estimator

java.lang.Object

org.drip.execution.principal.GrossProfitEstimator

org.drip.execution.principal.Almgren2003Estimator

public class Almgren2003Estimator
extends GrossProfitEstimator

Almgren2003Estimator generates the Gross Profit Distribution and the Information Ratio for a given Level of Principal Discount for an Optimal Trajectory that is generated using the Almgren (2003) Scheme. 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
• Almgren, R. (2003): Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk Applied Mathematical Finance 10 (1) 1-18
• Almgren, R., and N. Chriss (2003): Bidding Principles Risk 97-102
• Almgren, R., C. Thum, E. Hauptmann, and H. Li (2005): Equity Market Impact Risk 18 (7) 57-62

• Module = Product Core Module
• Library = Transaction Cost Analytics
• Project = Optimal Impact/Capture Based Trading Trajectories - Deterministic, Stochastic, Static, and Dynamic
• Package = Information Ratio Based Principal Trades

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor	Description
Almgren2003Estimator(PowerImpactContinuous pic, LinearPermanentExpectationParameters lpep)	Almgren2003Estimator Constructor

Method Summary

Modifier and Type	Method	Description
double	optimalInformationRatio(double dblD)	Compute the Optimal Information Ratio
double	optimalInformationRatioHorizon(double dblD)	Generate the Horizon that results in the Optimal Information Ratio
HorizonInformationRatioDependence	optimalMeasures()	Generate the Constant/Exponent Dependencies on the Market Parameters for the Optimal Execution Horizon / Information Ratio
double	principalDiscountHurdle(double dblI)	Compute the Principal Discount Hurdle given the Information Ratio

Methods inherited from class org.drip.execution.principal.GrossProfitEstimator

breakevenPrincipalDiscount, efficientTrajectory, horizonPrincipalMeasure, informationRatio, principalMeasure

Methods inherited from class java.lang.Object

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

Constructor Details

Almgren2003Estimator

public Almgren2003Estimator(PowerImpactContinuous pic,
LinearPermanentExpectationParameters lpep)
                     throws java.lang.Exception

Almgren2003Estimator Constructor

Parameters:

pic - The Power Continuous Market Impact Trajectory

lpep - The Linear Permanent Expectation Paremeter

Throws:

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

Method Details

optimalInformationRatioHorizon

public double optimalInformationRatioHorizon(double dblD)
                                      throws java.lang.Exception

Generate the Horizon that results in the Optimal Information Ratio

Parameters:

dblD - The Principal Discount "D"

Returns:

The Horizon that results in the Optimal Information Ratio

Throws:

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

optimalInformationRatio

public double optimalInformationRatio(double dblD)
                               throws java.lang.Exception

Compute the Optimal Information Ratio

Parameters:

dblD - The Principal Discount "D"

Returns:

The Optimal Information Ratio

Throws:

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

principalDiscountHurdle

public double principalDiscountHurdle(double dblI)
                               throws java.lang.Exception

Compute the Principal Discount Hurdle given the Information Ratio

Parameters:

dblI - The Optimal Information Ratio "I"

Returns:

The Principal Discount Hurdle

Throws:

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

optimalMeasures

public HorizonInformationRatioDependence optimalMeasures()

Generate the Constant/Exponent Dependencies on the Market Parameters for the Optimal Execution Horizon / Information Ratio

Returns:

The Optimal Execution Horizon/Information Ratio Dependency