ShortfallIncrement.java
package org.drip.execution.discrete;
/*
* -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
*/
/*!
* Copyright (C) 2020 Lakshmi Krishnamurthy
* Copyright (C) 2019 Lakshmi Krishnamurthy
* Copyright (C) 2018 Lakshmi Krishnamurthy
* Copyright (C) 2017 Lakshmi Krishnamurthy
* Copyright (C) 2016 Lakshmi Krishnamurthy
*
* This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
* asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
* analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
* equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
* numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
* and computational support.
*
* https://lakshmidrip.github.io/DROP/
*
* DROP is composed of three modules:
*
* - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
* - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
* - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
*
* DROP Product Core implements libraries for the following:
* - Fixed Income Analytics
* - Loan Analytics
* - Transaction Cost Analytics
*
* DROP Portfolio Core implements libraries for the following:
* - Asset Allocation Analytics
* - Asset Liability Management Analytics
* - Capital Estimation Analytics
* - Exposure Analytics
* - Margin Analytics
* - XVA Analytics
*
* DROP Computational Core implements libraries for the following:
* - Algorithm Support
* - Computation Support
* - Function Analysis
* - Model Validation
* - Numerical Analysis
* - Numerical Optimizer
* - Spline Builder
* - Statistical Learning
*
* Documentation for DROP is Spread Over:
*
* - Main => https://lakshmidrip.github.io/DROP/
* - Wiki => https://github.com/lakshmiDRIP/DROP/wiki
* - GitHub => https://github.com/lakshmiDRIP/DROP
* - Repo Layout Taxonomy => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
* - Javadoc => https://lakshmidrip.github.io/DROP/Javadoc/index.html
* - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
* - Release Versions => https://lakshmidrip.github.io/DROP/version.html
* - Community Credits => https://lakshmidrip.github.io/DROP/credits.html
* - Issues Catalog => https://github.com/lakshmiDRIP/DROP/issues
* - JUnit => https://lakshmidrip.github.io/DROP/junit/index.html
* - Jacoco => https://lakshmidrip.github.io/DROP/jacoco/index.html
*
* Licensed under the Apache License, Version 2.0 (the "License");
* you may not use this file except in compliance with the License.
*
* You may obtain a copy of the License at
* http://www.apache.org/licenses/LICENSE-2.0
*
* Unless required by applicable law or agreed to in writing, software
* distributed under the License is distributed on an "AS IS" BASIS,
* WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
*
* See the License for the specific language governing permissions and
* limitations under the License.
*/
/**
* <i>ShortfallIncrement</i> generates the Realized Incremental Stochastic Trading/Execution Short-fall and
* the corresponding Implementation Short-fall corresponding to the Trajectory of a Holdings Block that is to
* be executed over Time. The References are:
*
* <br><br>
* <ul>
* <li>
* Almgren, R., and N. Chriss (1999): Value under Liquidation <i>Risk</i> <b>12 (12)</b>
* </li>
* <li>
* Almgren, R., and N. Chriss (2000): Optimal Execution of Portfolio Transactions <i>Journal of
* Risk</i> <b>3 (2)</b> 5-39
* </li>
* <li>
* Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs <i>Journal of Financial
* Markets</i> <b>1</b> 1-50
* </li>
* <li>
* Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional
* Trades <i>Journal of Finance</i> <b>50</b> 1147-1174
* </li>
* <li>
* Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange
* Analysis of Institutional Equity Trades <i>Journal of Financial Economics</i> <b>46</b>
* 265-292
* </li>
* </ul>
*
* <br><br>
* <ul>
* <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
* <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/TransactionCostAnalyticsLibrary.md">Transaction Cost Analytics</a></li>
* <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/execution/README.md">Optimal Impact/Capture Based Trading Trajectories - Deterministic, Stochastic, Static, and Dynamic</a></li>
* <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/execution/discrete/README.md">Trajectory Slice Execution Cost Distribution</a></li>
* </ul>
*
* @author Lakshmi Krishnamurthy
*/
public class ShortfallIncrement extends org.drip.execution.discrete.EvolutionIncrement {
private org.drip.execution.discrete.PriceIncrement _pi = null;
/**
* Generate a Standard ShortfallIncrement Instance
*
* @param pi The Composite Slice Price Increment
* @param dblPreviousHoldings The Previous Holdings
* @param dblHoldingsIncrement The Holdings Increment
*
* @return The Standard ShortfallIncrement Instance
*/
public static final ShortfallIncrement Standard (
final org.drip.execution.discrete.PriceIncrement pi,
final double dblPreviousHoldings,
final double dblHoldingsIncrement)
{
if (null == pi || !org.drip.numerical.common.NumberUtil.IsValid (dblPreviousHoldings) ||
!org.drip.numerical.common.NumberUtil.IsValid (dblHoldingsIncrement))
return null;
double dblCurrentHoldings = dblPreviousHoldings + dblHoldingsIncrement;
try {
org.drip.execution.evolution.MarketImpactComponent micStochastic = pi.stochastic();
org.drip.execution.evolution.MarketImpactComponent micDeterministic = pi.deterministic();
return new ShortfallIncrement (
new org.drip.execution.evolution.MarketImpactComponent (
micDeterministic.currentStep() * dblCurrentHoldings,
micDeterministic.previousStep() * dblCurrentHoldings,
pi.permanentImpactDrift() * dblCurrentHoldings,
pi.temporaryImpactDrift() * dblHoldingsIncrement
),
new org.drip.execution.evolution.MarketImpactComponent (
micStochastic.currentStep() * dblCurrentHoldings,
micStochastic.previousStep() * dblCurrentHoldings,
pi.permanentImpactWander() * dblCurrentHoldings,
pi.temporaryImpactWander() * dblHoldingsIncrement
),
pi
);
} catch (java.lang.Exception e) {
e.printStackTrace();
}
return null;
}
private ShortfallIncrement (
final org.drip.execution.evolution.MarketImpactComponent micDeterministic,
final org.drip.execution.evolution.MarketImpactComponent micStochastic,
final org.drip.execution.discrete.PriceIncrement pi)
throws java.lang.Exception
{
super (micDeterministic, micStochastic);
_pi = pi;
}
/**
* Compute the Implementation Short-fall
*
* @return The Implementation Short-fall
*/
public double implementationShortfall()
{
return total();
}
/**
* Retrieve the Composite Price Increment Instance
*
* @return The Composite Price Increment Instance
*/
public org.drip.execution.discrete.PriceIncrement compositePriceIncrement()
{
return _pi;
}
}