Package org.drip.execution.principal

Class GrossProfitEstimator

java.lang.Object

org.drip.execution.principal.GrossProfitEstimator

Direct Known Subclasses:

Almgren2003Estimator

public class GrossProfitEstimator
extends java.lang.Object

GrossProfitEstimator generates the Gross Profit Distribution and the Information Ratio for a given Level of Principal Discount. 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
GrossProfitEstimator(EfficientTradingTrajectory ett)	GrossProfitEstimator Constructor

Method Summary

Modifier and Type	Method	Description
double	breakevenPrincipalDiscount()	Compute the Break-even Principal Discount
EfficientTradingTrajectory	efficientTrajectory()	Retrieve the Optimal Efficient Trajectory
R1UnivariateNormal	horizonPrincipalMeasure(double dblPrincipalDiscount)	Generate R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount
double	informationRatio(double dblPrincipalDiscount)	Compute the Information Ratio given the Principal Discount
R1UnivariateNormal	principalMeasure(double dblPrincipalDiscount)	Generate R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount

Methods inherited from class java.lang.Object

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

Constructor Details

GrossProfitEstimator

public GrossProfitEstimator(EfficientTradingTrajectory ett)
                     throws java.lang.Exception

GrossProfitEstimator Constructor

Parameters:

ett - The efficient Trading Trajectory Instance

Throws:

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

Method Details

efficientTrajectory

public EfficientTradingTrajectory efficientTrajectory()

Retrieve the Optimal Efficient Trajectory

Returns:

The Optimal "Efficient" Trajectory

principalMeasure

public R1UnivariateNormal principalMeasure(double dblPrincipalDiscount)

Generate R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount

Parameters:

dblPrincipalDiscount - The Principal Discount

Returns:

The R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount

breakevenPrincipalDiscount

public double breakevenPrincipalDiscount()
                                  throws java.lang.Exception

Compute the Break-even Principal Discount

Returns:

The Break-even Principal Discount

Throws:

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

horizonPrincipalMeasure

public R1UnivariateNormal horizonPrincipalMeasure(double dblPrincipalDiscount)

Generate R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount

Parameters:

dblPrincipalDiscount - The Principal Discount

Returns:

The R^1 Univariate Normal Gross Profit Distribution from the specified Principal Discount

informationRatio

public double informationRatio(double dblPrincipalDiscount)
                        throws java.lang.Exception

Compute the Information Ratio given the Principal Discount

Parameters:

dblPrincipalDiscount - The Principal Discount

Returns:

The Information Ratio

Throws:

java.lang.Exception - Thrown if the Inputs cannot be calculated